Is Zomato ready to begin its upward journey? Let's find out

Shares of Zomato surged as much as 13.85% on Tuesday after the company reported its quarterly results. 

The revenue has jumped sharply by 75% YoY to Rs 1212 crore. However, the company reported a loss of Rs 360 crore as against Rs 131 crore in Q4FY21. The operating margins have taken a major hit and pressure is likely to persist for some more quarters. The Founder and CEO, Deepinder Goyal, said that conserving cash is a priority and the company is being aggressive about it.   

The stock is in a strong medium-term downtrend. After hitting an all-time low of Rs 50.05, the stock has received strong buying interest at lower levels. Today, it formed a strong bullish candle with its open=low scenario and has closed nearly at a day’s high. With this, it has crossed above its short term resistance level of Rs 60. Interestingly, on the weekly timeframe, the stock has surged above the inside bar candle it had formed last week and indicates a bullish sign.  

After today’s strong surge, the 14-period daily RSI (50.56) has improved and indicates good strength. The daily MACD line has given a bullish crossover and indicates an upmove. Interestingly, the On Balance Volume (OBV) has jumped significantly higher and indicates strong strength from the volume’s point of view. On the technical chart, it has crossed above its 20-day moving average and is about 30% above its all-time low. However, the stock still trades below its 50-DMA, 100-DMA and 200-DMA.   

The stock shall see a good upmove if it crosses above its strong resistance of Rs 75 which happens to be its 50-DMA level. However, falling to do so shall keep the outlook bearish, and stock might fall below the level of Rs 60, thus proving this rise as a dead-cat bounce. Traders need to look at volumes along with RSI and price action to support their trade.