Is Paytm ready for a short-term reversal? Here's what technical charts say

Shares of Paytm are expected to jump up to 20 per cent after overcoming the resistance at the 50-DMA.

Paytm, formally known as One 97 Communication Limited, listed on the bourses on November 18, 2021 at Rs 1,950. The share started its journey at a steep discount to the IPO price of Rs 2,150, and since then has remained under pressure.

So intense has been the selling pressure, that the stock in the last five months did not even once registered a monthly gain and in fact went on to slide to Rs 521 in March 2022. This translates into a massive 75.7 per cent fall when compared to its issue price.

Recently, global brokerage firm Citigroup Research initiated a 'Buy' rating on the stock and raised its target price to Rs 910.  Citigroup forecast India’s P2M digital payment to rise from $500 bn in FY22E to $1.5 tn by FY26E. It also initiates a bullish stand anticipating 32 per cetn CAGR growth ahead. It believes current price valuations are attractive and priced-in most of the downside. 
 

"We think Paytm has several potential levers to drive scale and improve profitability substantially, leveraging its high-frequency user base of 71mn MTUs (up 41 per cent YoY in FY22) and 25 mn+ merchants," Citigroup said in its investors note.

 
Here's how the stock seems placed based on the technical charts:-

One 97 Communications Ltd (PAYTM)
Likely target: Rs 870
Upside potential: 20%

The shares of One 97 Communications have resistance around Rs 726, which is the 50-day moving average (DMA), according to the daily chart. The current reversal reflects an attempt to conquer this hurdle. As and when that happens, the stock could breakout on the upside displaying a positive rally towards Rs 870 level.

The Relative Strength Index (RSI) firmly trades above the oversold condition after almost three months, shows the daily chart. The stock price action and strength shows growing intensity that could push the share higher.

The closing basis support for the stock should be considered at Rs 650 mark, which is the breakout level of the formation that resembles “Inverse Head and Shoulder”, reflects the daily chart. CLICK HERE FOR THE CHART