Range Breakout: A Large-Cap Gearing Up for a ‘Quick Move’!

  • Stock Market Analysis
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Aayush Khanna/Investing.com - Investing.com

The last session of FY23 was extremely good, with all sectors witnessing investors’ demand. The large-cap index Nifty 50 itself rallied 1.63% to 17,359.75, clocking its biggest one-day gain (in %) after November 2022, all thanks to a 4.31% rally in the largest heavyweight - Reliance Industries (NS: RELI ).

As the Nifty 50 index has finally changed its trend to the upside, it might be a good idea to look for stocks on the long side. One such counter from the F&O space is Trent Limited (NS: TREN ). It is a large-cap retailer of ready-made garments, having a market capitalization of INR 47,491 crores.

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

Image Source: Investing.com

The share price of Trent had been consolidating in a very narrow range since 10 February 2023. The forces of demand and supply were almost deadlocked as bulls kept buying the support and bears kept offloading their holdings near the resistance. The range that got established is INR 1,275 (support) and INR 1,370 (resistance).

It seems like the stock was waiting for the broader market to get in a good mood, as on Friday, the stock surged past the resistance and closed above it on a weekly basis, at INR 1,374.95. This price action is defining a breakout in the security and therefore short positions from here might not have a high probability to stay in the green.

Ideally in a range breakout, traders can place a stop loss just below the resistance which gives a very good risk-to-reward (R:R) ratio. Some conservative traders also place a stop loss below the support of the range, which reduces the R:R but significantly increases the probability of winning. So, there is a trade-off and traders can decide for themselves how they want to play the upside move.

As per the height of the range, the rally from here could stretch to around INR 1,470 and at INR 1,480 there is strong resistance. Therefore short-term move should be booked once traders meet their targets.

Read More: 3 Simple Ways to Improve Your Options Trading

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  • Adnan Mevliwala @Adnan Mevliwala
    breakout was trap.. soon it will go below 1300 again
    Like 0
  • sunilkumar tejwani @sunilkumar tejwani
    Nice observation.
    Like 2
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Thank you :)
      Like 1

      • Comment Guidelines

      We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

      • Enrich the conversation
      • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
      • Be respectful. Even negative opinions can be framed positively and diplomatically.
      •  Use standard writing style. Include punctuation and upper and lower cases.
      • NOTE: Spam and/or promotional messages and links within a comment will be removed
      • Avoid profanity, slander or personal attacks directed at an author or another user.
      • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
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