Technical Stock Pick: Breakout from Cup and Handle pattern takes TCS to fresh highs; time to buy or book profits?

Short-to-medium-term can look to buy the stock or on marginal dips for a possible target of Rs 4900 in the next 4-5 months, suggest experts.

stock price underwent a brief period of price-wise correction from January 2022. It bounced back after forming a base above 2900 levels in July-October 2022.

The consolidation seen in the past 2 years took the form of a cup-like pattern and a brief consolidation after the breakout in February 2024 made a handle kind of pattern.

The IT stock witnessed a strong momentum last week which helped it to register a breakout from Cup and handle patterns on the weekly charts.

IT stocks are showing resilience and most of the technical indicators suggest that the momentum could continue. Hence, medium-term investors can look at buying the stock on dips towards 3600.

In terms of price action, TCS is well above most of the crucial short- and long-term moving averages such as 5,10,30,50,100, and 200-DMA which is a positive sign for the bulls.

The daily Relative Strength Index (RSI) is placed at 63.1. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed. The daily MACD is above its center and signal Line, this is a bullish indicator.

“TCS stock has given an all-time high breakout of the cup pattern formed during the last two years which suggests the start of a new bull market in stock prices,” Aditya Thukral, Founder & Analyst for AT Research & Risk Managers, said.

“The breakout happened a few weeks back with rising volumes and prices are now sustaining above the breakout levels consistently,” he said.

The price structure of higher highs and higher lows suggests an intact uptrend on short term as well as long term charts.

“An uptrend continuation is expected to happen in the stock prices where longs should have stop losses below 3650 on weekly closing basis which is the higher low of the ongoing rally and is now working as strong supports,” highlights Thukral.

The stock is well placed above all the major exponential moving averages viz. 50-day, 100-day and 200-day.

“As RSI reads closer to the overbought zone, the up move will not be fast but rather slow and steady with an exhibition of minor corrections. However, conservatively, one can expect the levels of 4900 to be seen in the coming 4 to 5 months,” recommended Thukral.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)