After correcting from a high of 215 and testing the lows of 137, Sonata Software has been consolidating in a range between the 137-168 levels for the last few months. The lows of 137 also correspond to previous intermediate lows which were tested during November 2016, thereby making it a strong support.
Last week, the stock broke out of the recent 137-168 consolidation range on the back of huge volumes. This indicates that the stock looks set to continue the next leg of its uptrend.
Technical indicators are currently giving positive signals as the stock trades above the short term (13 day SMA) and medium term (50 day SMA) moving averages. Momentum indicators like the 14-week RSI are in rising mode and at 65.06 is not yet in overbought territory and trades above its 9-week EMA, which is a positive signal. The MACD signal too is in buy mode.
We believe the stock has the potential to move higher in the coming weeks as it attempts to make new life highs.
We therefore recommend a Buy at CMP and adding more on any dips. Our entry levels, along with stop loss and targets have been mentioned above.
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