‘Triangle Breakout’ Propels Stock Over 5%, Volume Jumps 290%!
The markets are about to close this week with a good rally. The benchmark index is up 0.82% to 18,840, by 3:05 PM IST with most of the sectoral indices trading in the green zone. As the broader theme is still favoring bulls, one stock that is ready to make them happy is RITES (NS:Limited ).
The company is in the business of providing engineering and consultancy services, having a market capitalization of INR 9,091 crores and trades at a low P/E ratio of 16.77, compared to the sector’s average of 39.93.
Image Description: Daily chart of RITES with volume bars at the bottom
Image Source: Investing.com
The stock has rewarded investors with a good 62% return in the last 12 months, beating the index’s return of around 28% in the same period. This outperformer had been consolidating in a narrowing range for the last few weeks which translated into a symmetrical triangle chart pattern on the daily time frame.
This is a volatility contraction pattern that shows volatility compression and as a result, propels the stock in one direction upon a breakout as volatility also expands with the move. The share price of RITES Limited jumped 5% to INR 397 and surged past the falling trendline resistance of this triangle pattern which was around INR 388.
This clear breakout was also backed by an increased volume figure of 2.51 million shares so far, which is over 290% higher than the 10-day average volume of 643K shares. Any breakout being backed by a good volume has relatively higher reliability. I prefer a volume expansion over 300% at least, so this stock almost makes it to this threshold.
The duration of the pattern formation is small therefore a very large up move should not be expected. Traders can eye for a level of around INR 420 in the immediate future which might not seem much, but can give a quick swing opportunity. Long holders can place a stop loss just below the rising trendline support of the triangle pattern, which is currently at INR 374.
Read More: Penny Stock Under Rs 4: Ready to Make Bulls Happy!
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The markets are about to close this week with a good rally. The benchmark index is up 0.82% to 18,840, by 3:05 PM IST with most of the sectoral indices trading in the green zone. As the broader theme is still favoring bulls, one stock that is ready to make them happy is RITES (NS:Limited ).
The company is in the business of providing engineering and consultancy services, having a market capitalization of INR 9,091 crores and trades at a low P/E ratio of 16.77, compared to the sector’s average of 39.93.
Image Description: Daily chart of RITES with volume bars at the bottom
Image Source: Investing.com
The stock has rewarded investors with a good 62% return in the last 12 months, beating the index’s return of around 28% in the same period. This outperformer had been consolidating in a narrowing range for the last few weeks which translated into a symmetrical triangle chart pattern on the daily time frame.
This is a volatility contraction pattern that shows volatility compression and as a result, propels the stock in one direction upon a breakout as volatility also expands with the move. The share price of RITES Limited jumped 5% to INR 397 and surged past the falling trendline resistance of this triangle pattern which was around INR 388.
This clear breakout was also backed by an increased volume figure of 2.51 million shares so far, which is over 290% higher than the 10-day average volume of 643K shares. Any breakout being backed by a good volume has relatively higher reliability. I prefer a volume expansion over 300% at least, so this stock almost makes it to this threshold.
The duration of the pattern formation is small therefore a very large up move should not be expected. Traders can eye for a level of around INR 420 in the immediate future which might not seem much, but can give a quick swing opportunity. Long holders can place a stop loss just below the rising trendline support of the triangle pattern, which is currently at INR 374.
Read More: Penny Stock Under Rs 4: Ready to Make Bulls Happy!