Technical Check: Thermax rallies over 100% in a year! Pennant breakout signals further upside

Thermax Ltd rallied more than 100 per cent in the last 1 year compared to over 40 per cent upside seen in the Nifty50 in the same period look poised for further upside in the next 2-3 months post Pennant breakout.

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Thermax with a market capitalization of more than Rs 19000 cr hit a fresh 52-week high of Rs 1626 on 15 November. The stock has been on buyers radar in the past 30 days as it recorded an upmove of over 16 per cent in the same period.

The stock after breaking out from the consolidation range back in February has now witnessed a strong consolidation breakout known as ‘Pennant’ on the monthly chart in November.

Pennant is a continuation pattern that is usually formed after a brief period of consolidation. Volume is an important factor to be considered on the breakout.

The breakout seen in early November from the said pattern signals a target of Rs 1990 which translates into an upside of nearly 30 per cent from Rs 1533 recorded on 12 November on the BSE, suggest experts.

Post a strong consolidation of 5 years between the range of 700 to 1300; the stock prices finally witnessed a long-term bullish breakout during the February month of this calendar year.

This pattern can be identified as ‘Rectangular Channel’ on the monthly chart. The follow-up move after this breakout was very swift and within no time the prices went on to make a new high above the 1550 levels.

“With such a strong move the momentum oscillators were in deep overbought territory and hence in the last few months, we didn’t see any major traction in the prices as the oscillators needed to cool down,” Rajesh Bhosale, Technical Analyst, Angel One Ltd, said.

The prices have been consolidating above the long-term breakout level which is technically a tendency of a price pattern to retest breakout levels before heading for bigger targets.

“Now bulls have again picked up momentum and we are witnessing a strong consolidation breakout known as ‘Pennant’. This recent strong up move was followed after the company announced strong quarterly results and robust order inflows,” he said.

With the strong technical setup and good earnings, Bhosale is upbeat on this industrial engineering company and recommends a buy at current levels and on dips to Rs. 1435 for a price target of Rs. 1990. The stop loss can be fixed at Rs. 1315.

(Disclaimer: The views/suggestions/advice 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.)