BODAL CHEMICAL-LOOK-FOR-BUY-WITH-CHEAT-ENTRY(VCP)This chart presents a Volatility Contraction Pattern (VCP) , signaling a potential bullish breakout. The integration of moving averages and volume dynamics adds further strength to this analysis, indicating that the stock could soon break out above its resistance. Below is a detailed breakdown, including a volume study.
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1. VCP (Volatility Contraction Pattern):
- The chart shows multiple contractions in price , with each pullback becoming progressively smaller. This tightening is a hallmark of the VCP pattern, indicating that sellers are losing strength, and buyers are gradually gaining control.
- The final resistance zone is located between ₹85-₹88 . A breakout above this level would confirm the VCP and signal a strong bullish continuation.
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2. Moving Averages (9 SMA & 21 SMA):
- Price above both SMAs : The stock is trading above both the 9-period and 21-period simple moving averages (SMAs), which is a strong bullish indicator. This alignment suggests that short-term momentum is in favor of the bulls.
- 9 SMA above 21 SMA : The 9-period SMA being above the 21-period SMA signifies that the shorter-term trend is leading the way, which adds confidence to a possible continuation of the uptrend.
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3. Volume Study :
Volume During Contractions :
- A crucial part of identifying a valid VCP is the decreasing volume during price contractions . In the chart, each successive pullback shows lower volume, which indicates that fewer traders are willing to sell as the stock price drops. This aligns perfectly with the concept of volatility contraction, showing that selling pressure is fading.
Volume on Upward Moves:
- Each upward move is accompanied by increasing volume , indicating that buyers are stepping in to accumulate shares. This is a strong confirmation that the price contractions are valid and that institutional buyers might be behind these moves, building up positions for a future breakout.
Volume on Breakout:
For a confirmed breakout, watch for a volume spike above ₹85-₹88 . A large increase in volume during the breakout would confirm that the pattern is playing out and that the price could shoot upward to the next resistance zone around ₹95-₹100.
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4. Low Cheat Entry Opportunity:
- Entry at CMP (₹83-₹84): A low cheat entry is possible at the CMP of ₹83-₹84, which allows you to enter the stock before the breakout occurs. This type of early entry can offer a more favorable risk-to-reward ratio.
- Stop Loss : Place a tight stop loss around ₹82 , just below the recent low and the 9 SMA. This minimizes risk while allowing you to stay in the trade if the breakout occurs.
- Volume Support: As you enter at this level, watch for **volume support** on smaller pullbacks. If the stock dips slightly but maintains increasing volume on upward movements, it’s a good sign the pattern is intact.
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5. Breakout Confirmation :
- The ₹85-₹88 resistance zone is the key level to watch. For the VCP to fully play out, the stock needs to break above this zone, ideally with strong volume to confirm the breakout.
- If the stock breaks this level, expect a surge in price with a target around ₹95-₹100 , based on prior resistance levels and the projected move from the VCP.
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6. Risk-to-Reward Ratio :
- Risk : By entering at ₹83-₹84 and placing a stop loss around ₹82, the downside risk is limited to about 1-2% .
- Reward : The upside target can range from ₹95 to ₹100 , offering a potential *b]15-20% gain , which gives an excellent risk-to-reward ratio of about 15%.
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Conclusion :
This chart shows a strong b]bullish setup , with the VCP pattern tightening for a potential breakout. The moving averages confirm the bullish momentum, with price trading above both the 9 and 21 SMAs, and volume contraction indicates that selling pressure is diminishing. A low cheat entry around ₹83-₹84 offers a good risk-to-reward opportunity, while a breakout above ₹85-₹88 with increasing volume could signal the start of a strong upward move toward ₹95-₹100 .
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Key Action Plan :
- Entry : Enter at CMP around ₹83-₹84 .
- Stop Loss : Set a stop loss around ₹82 to minimize risk.
- Volume Monitoring : Watch for volume contraction on pullbacks and spikes on upward moves.
- Breakout : If the stock breaks above ₹85-₹88 with strong volume , expect a strong upward move toward ₹95-₹100 .
This setup presents a high-potential opportunity for traders looking for an early entry into a VCP breakout , supported by both moving averages and volume dynamics.
