Technical Analysts see further weakness for Mazagon Dock Shipbuilders as the stock is witnessing correction from record highs. They said the stock is in a sell-on-rise territory and advised investors to exercise caution.

What Happened: Mazagon Dock Shipbuilders stock has fallen around 12% in the last 5 sessions. ICICI Securities maintained a “sell” call with a target price of ₹1,165, indicating a 70% downside, reasoning expensive valuations at current levels.

The defence company’s order book also fell slightly to ₹36,839 crore in the June quarter compared to ₹38,561 crore in March. The company however reported a 132% rise in net profit to ₹665.94 crore in its Q1 results.

Technical Views: Technical analysts said the stock has been showing bearish patterns and warned of further weakness in the scrip. Anshul Jain, head of research at Lakshmishree said “After an impressive 221% rally in just 15 weeks, the stock appears to have topped out, forming a “Buying Climax” pattern on the weekly charts.

This pattern often signals the end of a bullish phase, and historically, there’s a 50% chance of an 80% correction and an 80% chance of a 50% correction following such a move. The stock has breached its 50-day moving average, indicating a broader weakness. With the current market price at ₹4,350, we anticipate a sharp decline to ₹2,800 levels. Any rally towards ₹4,800 should be viewed as a selling opportunity. Traders should be cautious, as the potential for significant downside is strong.”

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Rupak De, senior technical analyst, at LKP Securities, said, “Lately the stock has been moving down with lower top lower bottom formation. Immediate support is visible at 4290; below which further correction looks possible. The stock looks a sell-on-rise candidate until it moves back above 4520. Below 4290, it might fall towards 4000/3800.”

Jigar Patel, senior manager, technical research at Anand Rathi Shares and Stock Brokers said “After reaching a peak near 5860 on July 5, 2024, Mazdock has experienced a significant decline, dropping approximately 1580 points. This translates to a sharp 27% decrease in the stock’s price, indicating a substantial bearish movement. “

He added that other technical indicators show further weakness in the stock. “From a technical analysis perspective, the Ichimoku Cloud indicator suggests that support is likely around the Span B level of the cloud, which corresponds to the 4000 level. The Ichimoku Cloud is a comprehensive indicator that provides insight into potential support and resistance levels, and Span B is often viewed as a strong support area.

Additionally, the Daily Relative Strength Index (RSI) has fallen below the 50 level, further signalling weakness in the stock. The RSI measures the speed and change of price movements, and a reading below 50 typically indicates that bearish momentum is prevailing. Given these factors, it is expected that Mazdock may enter a consolidation phase between 3950 and 4200 once it tests the 4000-support level. Consolidation in this range would suggest that the stock is stabilizing after its sharp decline, but it may not yet be ready to resume an upward trend. Therefore, it is advised to adopt a cautious approach and to wait and watch how the stock behaves around the 4000 level before making any trading decisions.” he added.

Price Action: Shares of Mazagon Dock fell 8.95% to ₹4,302.10 on Tuesday.

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