Ascending Triangle Breakout: Stock Gains 5% to ‘All-Time High’!

The volatility in the broader markets continued in today’s session as well on account of the ongoing Adani Group rout. But one stock that is unscathed by the weak sentiments is Blue Star Limited (NS:), a small-cap air-conditioning and commercial refrigeration company with a market capitalization of INR 12,202 crores.

The stock has been rising for the third consecutive session, gaining a total of 9% including today’s 4.93% rally to INR 1,329.6 by 11:29 AM IST. Firstly, the stock is showing a good relative strength as compared to the index which is up 2.5% in the same period. Blue Star holds a 0.9% weightage in this index. 

Image Description: Daily chart of Blue Star with volume bars at the bottom

Image Source: Investing.com

Secondly, today’s move has materialized into a massive Ascending Triangle breakout on the daily chart, bolstering the stock to an all-time high of INR 1,335. This Ascending Triangle is a form of Asymmetrical Triangle chart pattern, wherein the stock shows consistency in forming the resistance (upper trendline) of the triangle which makes it horizontal because of the similar level of peaks.

On the other hand, the support (lower trendline) of the triangle keeps on rising as investors show their enthusiasm to buy the dip, leading to a consistently higher low formation.  

Today, the stock surged past the resistance level of INR 1,280 of the triangle and this breakout coupled with the all-time high levels is painting a bullish picture for the stock. Although it is difficult to gauge the price target of a rally at all-time high levels, one can look at the dimensions of the pattern to arrive at an estimate in this case.

As per the height of the triangle pattern, the rally can extend to around INR 1,470 in the future. As there is no overhead supply left, these levels are easily achievable. One probable spoiler for the bulls could be a low volume figure. As of writing, the total recorded volume on the NSE is around 95.29K shares, which is 53% higher than the 10-day average volume of INR 62.49K shares, which is definitely low. Therefore, bulls also need to look at their risk management while initiating or holding a long position. 

Also, a low volume on a breakout does not mean a bearish signal, just a not-so-strong bullish signal. This difference should be understood by traders.