Sobha Ltd soars over 5% with strong volumes; breaks the trend reversal pattern

On the last trading session of the week, the Nifty index opened on a negative note due to global cues. However, it managed to recover from the initial losses and achieved a new all-time high. Following this record-breaking level, a sudden wave of profit booking caused a sharp decline, and it is currently trading near the day’s lowest levels. Nevertheless, amidst this market weakness, one standout stock in the realty sector displayed relative strength by surging over 5% on strong volumes, marking a breakout of the trend reversal price pattern known as the “Inverted Head and Shoulders.”

That stock is Sobha Limited, an established real estate developer involved in the construction and operation of townships, housing projects, commercial premises, and related activities. The company also engages in manufacturing activities related to interiors, glazing, metal works, and concrete products. Sobha Limited operates through two segments: Real Estate and Contractual and Manufacturing.

From a technical perspective, analysing the stock’s performance from January 20, 2023 (Rs 622.80) to June 02, 2023 (Rs 589.80) reveals a breakout trendline known as the Inverted Head and Shoulders pattern, indicating a potential trend reversal. Notably, this breakout is supported by robust volumes, with more than 3.5 million shares traded, surpassing the average volume of the last 50 days, which signifies a healthy breakout. In today’s session, the stock witnessed strong buying interest, resulting in an impressive surge of over 5%.

Presently, Sobha Ltd is trading at around Rs 584. If the stock manages to close above the breakout trendline level (Rs 581), it will confirm the long-term breakout of this technical price pattern. The minimum target for this pattern is approximately Rs 760, representing a potential increase of over 30% from the breakout level.

In addition to the breakout pattern, Sobha Ltd has surpassed the 200-day moving average (DMA), and the 14-week relative strength index (RSI) stands comfortably in the bullish zone at a level of 70.70 RSI, indicating strong momentum.

Therefore, both momentum traders and long-term investors should consider keeping Sobha Ltd on their radar for the upcoming sessions.

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.