Watchlist: Keep this Stock on Radar to Catch a ‘Sharp Move’!

  • Stock Market Analysis
  • Editors Pick

Today’s session is a proper sunny day for investors who have had a tough time in the last many days. The expected gap up in the morning in the Nifty 50 index, followed by a follow-up move is all bulls needed to regain some confidence.

While it won’t be difficult to find stocks that are on the move but still being selective in this market where almost every stock is trading in the green zone is a necessity. One stock that should be on the radar for investors is an online food delivery service platform, Zomato (NS: ZOMT ). The company has a market capitalization of INR 51,601 crores and is one of the typical examples of “hate me or love me but can’t ignore me”. The stock almost always remains in the news either on account of bulk deals, earnings reports, acquisitions, sharp declines and rallies in the stock price etc. 

Image Description: Daily chart of Zomato with volume bars at the bottom

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As the market is recovering from the lows, Zomato shares are also under the spotlight. The stock rose 3.47% to INR 64.05 by 11:23 AM IST as investors are making an attempt to capitalize on a potential rally. The stock had been more or less moving in a broad range for almost 1.5 months. As the stock was trading sideways with a slight downward tilt, the peaks made during this phase kept on inching lower. This simply means that sellers are gradually becoming more and more aggressive in liquidating their holdings and as a result not willing to wait for the higher levels to take their action. This behavior leads to the formation of lower highs.

This series of lower highs can further be expressed by the way of drawing a falling trendline that joins the peaks made during the phase. This trendline has essentially become a resistance above which the stock needs to cross to resume its upside. 

Today, Zomato shares made a high of INR 64.45 which almost exactly touches this trendline resistance. This is the fourth time that the stock is taking a U-turn from this trendline, further increasing its importance. In technical parlance, the more the trendline gets tested by the stock, the more its importance increases.  

Investors can keep this stock on the radar, as when this trendline gets breached with volume support, Zomato shares could start a rally which could easily take it to the previous highs of around INR 69 - INR 70. Above this resistance, a level of INR 72 would be the next supply zone.

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