TATACOMM: Ascending Channel Breakdown & Critical Support Levels

24 oct.

Pattern Identified:
The stock is trading within an ascending channel (parallel trendlines) that has been in formation since early 2021. Recently, it appears to be approaching the lower support of the channel, signaling potential risks of a breakdown if selling pressure continues.

Key Technical Observations:

• Channel Breakdown Threat: The price has been trending within an upward-sloping channel. However, it recently fell sharply from the upper boundary of the channel and is now testing the lower boundary. A confirmed breakdown below the lower trendline could trigger a further downtrend.
  

• Critical Support Levels:

1. The ₹1,783 level has held strong as an immediate support zone. If broken, the next support lies at ₹1,693, a significant historical level from previous price action.
   
2. A break below ₹1,693 could lead to a deeper correction, potentially targeting the ₹1,500-1,400 zone.
   

• Resistance Levels: If the stock manages to bounce, it will face overhead resistance at:
  

1. ₹1,873 (previous resistance)
   
2. ₹2,000 (psychological barrier)
   
3. ₹2,200 (channel top)
   

• Moving Averages:

1. The stock is currently hovering near its 20-week EMA, which aligns with the lower channel support.
   
2. It is also far above its 200-week EMA, indicating long-term uptrend strength, though the current pullback should be monitored closely.
   

• Volume and RSI:

1. Volume spiked during recent sell-offs, suggesting a significant distribution phase.
   
2. The RSI (Relative Strength Index) is nearing oversold territory, which might lead to a short-term bounce. However, a lower RSI could indicate bearish momentum persisting.
   

Outlook:

1. A channel breakdown may indicate a trend reversal, with the possibility of a deeper correction towards ₹1,500 if key support levels don’t hold.
   
2. Traders should watch for a confirmed breakdown or a bounce off the lower channel to time potential trades.
   

Conclusion: The stock is at a pivotal point, testing the lower boundary of its ascending channel. A decisive move below the ₹1,783 support could accelerate the downside, whereas a successful defense might offer a good risk-reward for a bounce. Investors should closely monitor price action and volume for signs of confirmation.