This defence stock is experiencing a positive range breakout; should you invest in it?

MTAR Technologies broke out from a range with a 7% rally and a whopping 600% volume spike. Read on to find out whether or not you should invest in this stock.

As a result of the markets' excessive rally over a relatively short period, selling pressure is being seen throughout today's session, which was partly expected. By 1:00 p.m., Nifty 50 index was down 0.7% to 18,679.9; nevertheless, this should not be termed a downtrend, but rather a running correction.

MTAR Technologies Ltd, once again focused on long-term potential, is creating waves on the street with its range breakout. This small-cap company is a producer of mission-critical precise and heavy equipment, components, and machinery that service industries such as defence and aerospace.

Despite a weakening market, MTAR Technologies' share price is gaining traction, due to a strong intraday surge of 7% to Rs 1,712.55. Along with reaching its highest point since mid-September 2022, the stock has also achieved a range breakout on the daily charts. 

For more than three months, the stock did not move. Support from the lower levels and selling from the upper levels held it in a sideways trend, trading range bound. Around Rs 1,520 serves as the range's support, while Rs 1,700 serves as its resistance. Despite many intraday rises over this barrier in the past, the stock has never been successful in closing above it. 

As a result of the remarkable volume expansion supporting today's move, it appears that the breakout is practically confirmed this time. At the time of writing, a total of 681.04K shares swapped hands, which is 600% greater than the 10-day average volume of 78.3K shares reported yesterday. The increase in volume demonstrates market players' growing desire to acquire MTAR Technologies shares. As it is Friday, if the resistance level of Rs 1,700 is breached on a closing basis today, the breakout would be validated on the weekly chart as well. 

Even if the stock falls back below the barrier before the close, the trend will not become negative, and any subsequent effort to overcome this obstacle in the next week should be closely monitored. Only when the price breaches the 3-month-long support of Rs 1,520 could the trend be considered bearish.