This IT stock witnesses cup pattern breakout!

On Friday, the stock has gained more than 11% and made a fresh all-time high of Rs 8534 level.

Tata Elxsi Limited is engaged in the design and development of computer hardware and software. The company operates in two segments: System integration & support, and Software Development & Services.

On Friday, the stock has gained more than 11% and made a fresh all-time high of Rs 8534 level. With this, the stock has witnessed a breakout of a 7-week long Cup like pattern on the weekly chart which has a depth of nearly 25%. It’s interesting to note, that the stock has witnessed breakout with a sizable bullish candle along with robust volume. The stock has witnessed volume of more than 2.5 times of 50-weeks average volume. 

As the stock is trading at a fresh all-time high, it is above all the short and long-term moving averages. The stock is meeting Mark Minervini’s trend template. It is trading above 40, 30 and 10-weekly moving averages and all of them are trending up. At the same time, there is a desired sequence. It is also meeting Guppy Multiple Moving Average (GMMA) set up by Daryl Guppy. This structure indicates that the stock is in clear uptrend.

The leading indicator, 14-period weekly RSI is in a super bullish zone and it has given a bullish crossover last week. The weekly MACD is pointing northward while sustaining above its nine periods average thus validating positive bias. The stock is clearly in an uptrend and trend strength is extremely high. The Average Directional Index (ADX), which shows trend strength, is as high as 39.33 on a weekly chart. Generally, above 25 levels considered as the strong trend. Furthermore, +DMI line is moving northwards and is above 25 level, which is bullish.

Based on the above observations, we expect the stock to continue its upward movement and test levels of Rs 9600, followed by Rs 1040 in the long term. While on the downside, the 10- week moving average which stands as Rs 7236 is likely to act as strong support for the stock.