Breakout stocks of the day: Sonata Software and Redington

With price volume support, Sonata Software and Redington are strong bullish breakout potential stocks. The stock prices have displayed a volatility contraction price breakout and bounce back from 10-week EMA, and both presently trading at Rs 807 and Rs 203. The breakout and bounceback align with positive signals from technical indicators such as RSI, ADX, and other key metrics, reinforcing the likelihood of continued upward momentum.

Sonata Software Ltd

Daily chart of Sonata Software Ltd

Sonata Software is currently displaying sustained bullish momentum on the daily chart, characterised by a notable breakout from a basing pattern. This breakout is supported by the good volume observed in Monday’s trade, highlighting active buyer participation with substantial daily volume.

Monday’s trading session began at Rs 768 and reached a peak of Rs 815. After 5 days of pattern formation, the stock has successfully breached the upper resistance or 52-week high, indicating a potential continuation of the long-term uptrend.

The current stock price is trading above its 50-day EMA, driven by increased volume during a particular trading session, indicating that investors are interested in up moves. In the case of an upper trendline retest after a week, it may set Sonata Software up for a stronger positive trend shift, and the accumulated volume suggests further growth soon. The bounce from the near-lower resistance acted as support, emphasising the stock’s effort to establish new highs.

On the RSI chart, the relative strength index crossed the level of 65 with a similar pattern formation, and ADX declining at 17 indicates low directional strength, favouring a slower trend. In the event of a retracement, it is essential to monitor key support levels, particularly at Rs 743. The upper resistance is uncertain for the stock, and the overall favourable structure is maintained as the stock consistently trades above crucial moving averages, affirming a sustained long-term upward trend.

Sonata Software Ltd is a holding company, which engages in the provision of information technology services and solutions.

Redington Ltd

Daily chart of Redington Ltd

Redington’s current stock performance is characterised by a strong green candle trading at Rs 203 and has the potential to continue this strong uptrend, accompanied by a significant increase in trading volume in the last 2 days. Currently, the stock price is breaking out back from its ATH.

Starting at Rs 191 on Monday, the stock reached an intraday low of Rs 208. The last two days’ upsurge is notable as they followed a few days of consolidation, suggesting a likely continuation of the bullish trend if the price manages to close above new higher highs.

The next level of the breakout occurred with a closing of the day candle above the all-time high, indicating bullish momentum. After reaching its 52-week high, the stock witnessed a rapid ascent in the day trading sessions, following sustained levels near Rs 201. The current market action is supported by a surge in price volume, surpassing the typical trading day volume.

The relative strength index (RSI) recently traded in a higher range at 78.76, suggesting the potential for a significant upward movement in the stock price is still there, particularly as it continues to trade above this level. The ADX, currently at 31, indicates good directional strength with smaller sideways movement. The Relative strength against Nifty 50 suggests the outperformance of the stock as shown in the above chart. The 10-Week Exponential Moving Average (EMA) serves as a crucial support level during larger corrective movements after breakout, and the overall market structure favours traders if the stock consistently trades above major moving averages.

Redington Ltd is in the provision of machinery, equipment and supplies.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.