AUTOIND - BUY BEFORE BREAKOUT -LOW CHEAT ENTRY
1. Technical Setup
Cup and Handle Pattern: The stock has formed a well-defined cup and handle pattern. This is a bullish continuation pattern and typically indicates that the stock is gearing up for a breakout to the upside. The resistance level to watch is around ₹154–₹155.
VCP Pattern (Volatility Contraction Pattern) : Simultaneously, the stock is showing a classic VCP setup, characterized by a series of contractions with decreasing volatility, signaling that supply is being absorbed, and demand may be increasing. The price action is tightening as it approaches the key resistance zone.
2. Volume Analysis
Shrinking Volume: During the pullbacks in the VCP pattern, we can see shrinking volume, which is a key characteristic of a potential breakout. This signals that sellers are fewer, and buyers could soon take control.
Breakout Volume: A strong breakout needs to be accompanied by a noticeable increase in volume to confirm the move. If this happens, it could lead to a significant upward rally.
3. Resistance and Breakout Levels
The stock faces a key resistance around ₹154–₹155 . If it breaks above this level, confirmed by strong volume, it could signal a successful breakout of both the cup and handle and VCP patterns, leading to further upward momentum.
4. Low Cheat Entry Strategy
You can enter early (before the breakout) using a low cheat entry around ₹140–₹145. This allows you to enter the trade at a better price with a tighter stop-loss, reducing your risk while potentially capturing a larger portion of the breakout.
Stop-loss: If you opt for a low cheat entry, place a stop-loss around ₹135, just below the last contraction or the handle. This provides a relatively tight risk to reward ratio.
5. Target Price
First Target: ₹154–₹155, the immediate resistance level. If you enter early with a low cheat entry, you may consider taking partial profits at this level.
Breakout Target: Based on the pattern's depth and the measured move from the cup, the target after a successful breakout could be in the ₹180–₹190 range.
6. Risk Management
Stop-Loss : Whether you enter at the breakout or use the low cheat entry, a stop-loss around ₹135 would limit downside risk.
Position Sizing: As you're planning a low cheat entry, consider taking a smaller initial position to reduce risk, and possibly adding more once the breakout is confirmed.
7. Market Sentiment and Overall Trend
The stock appears to be in an uptrend, trading above the moving averages, and has been consolidating for a while, indicating accumulation.
The market sentiment is also a factor—if the overall market is bullish, it increases the chances of a successful breakout.
Conclusion
Bullish Bias: Both the cup and handle and the VCP pattern suggest a potential bullish breakout. The stock is well-positioned for an upward move if it breaks the ₹154–₹155 resistance level with strong volume.
Low Cheat Opportunity: A low cheat entry around ₹140–₹145 offers a chance to enter early with a tighter stop-loss, increasing the risk-to-reward potential.
Targets: The short-term target is around ₹154–₹155, with a breakout target ranging from ₹180–₹190.
This stock looks promising for a bullish trade, especially if the market conditions align with the breakout. Keep a close watch on the price action around key levels, and ensure proper risk management with stop-losses.
