Breaking lines in codes with mcode package

Use \usepackage[autolinebreaks]{mcode}. Other possible options which may be of interest to you are [framed,numbered,autolinebreaks,useliterate.....]. For more details, look into the source code of mcode.

Edit for the revised question.

If autolinbreaks option is given, mcode.sty defines lstset as (line no 231 in mcode.sty of version 2.7.0.0)

\lstset{breaklines=true,breakatwhitespace=true,prebreak=\usebox{\lbreakdots}}

The culprit here is breakatwhitespace=true. Your formula has no white spaces and hence it will never break at the end of line.

Solution

Add

breakatwhitespace=false 

after loading mcode.

MWE will be

\documentclass{book}

\usepackage{graphicx}
\usepackage{amsmath,amssymb}
\usepackage{caption}
% \usepackage{color,xcolor}
\usepackage[framed,numbered,autolinebreaks,useliterate]{mcode}
\lstset{breakatwhitespace=false} %%<---this line added

\begin{document}

\begin{figure}
\caption{My program for plotting the above formula in 2 different conditions}
\lstinputlisting{technique.m}
\end{figure}

\lstinputlisting[caption={My program for plotting the above formula in 2 different
 conditions}]{technique.m}

\end{document}

Note: Instead of putting your code inside figure environment, you can use the second instance as I showed in the code. The differences are clear, I hope.

Another alternative is the package Listings (Documentation here). It's very customizable, but for example, this would suffice I think:

\usepackage{listings}    
\lstset{
        language=Matlab,
        breaklines=true
    }

You can then embed files using \lstinputlisting{test.m}. With additional styling parameters, one can produce something like this (these are the contents of test.m compiled into .pdf):