Technical Check: Over 140% in 2021! This software company forms a Diamond pattern which makes it an attractive buy

Intellect Design Ltd rallied 140 per cent so far in 2021 compared to 23 per cent upside seen in the Nifty50 in the same period, and the trend still looks to be on the upside post the recent breakout.

What's breakout phase?
A breakout is a phase where stock price moves outside a consolidation with increased volumes. Such breakouts generally lead to good price movement in the short term.

Stock performance
The stock with a market capitalization of more than Rs 10,000 cr hit a fresh 52-week high of Rs 892 on 26 July, and since then it has been consolidating in a range.

Intellect Design Arena creates financial technologies that help banks lead businesses on the path to growth and success. It is a leading financial platform for Corporate Banking, Retail Banking, Brokerage Solution, Treasury Management, Insurance Software.

The stock made a low of Rs 577 on 23 August and then bounced back. This stock has recently seen a consolidation phase and a breakout from a ‘Diamond’ pattern on the daily chart can be seen which will add momentum to the stock.

“Stocks prices have given a breakout from the resistance end of a Diamond pattern which is a positive sign. Also, the volumes on breakout were higher than its recent daily average and thus, we could see a trended up move in this stock in the short term,” Ruchit Jain, Lead Research, 5paisa.com, said. 

Diamond Pattern
A diamond pattern is used for detecting reversals following a downtrend. The stock fell over 30 per cent from the recent high of Rs 892 before reversing losses.

This pattern is usually formed after a brief rally which took the stock to a high point in November followed by a decline seen in the stock which took it towards Rs 603 levels recorded on 29 November. The stock makes a high again which pushes the stock from the breakout range.

Technically, the stock is trading well above short- and long-term trading ideas of 30,50,100, and 200-Days Moving Average which is a positive sign for the bulls.

“Tracking the momentum in the stock post the breakout, traders can look to trade with a positive bias and buy in the range of Rs.720-715 for potential targets of Rs. 790. One can place a stop loss below Rs. 680 on long positions,” said Jain.

(Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)