Stock Rallies 8% amid 5-Month Long ‘Symmetrical Triangle Breakout’!

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Indian investors are having a good time with the continuous rally in the broader markets. After the US 8.5% inflation in July 2022, the Indian markets have reacted positively on the back of positive global cues. In the midst of a green sea of numbers, one stock that has fallen noticeably from the 52-week high is now looking to pare all the losses.

The company is Indraprastha Gas Ltd (NS: IGAS ), a prominent midcap player in the gas distribution space, with a market capitalization of INR 26,586 crores. In the June 2022 quarter, the company reported a 28.68% QoQ growth in consolidated net revenue to INR 3,284.97 crores, while net profit rose 11.67% QoQ to INR 481.24 crores. The FY22 net income of INR 1502.27 crores was the highest ever annual profit the company clocked till now.  It is also a dividend-paying company with a current payout of 0.26 and the share price of IGL trades at a dividend yield of 1.45%, compared to the sector’s average of 1.49%.

The stock had been making noise since yesterday when it rallied 5.87%, while today another rally of 8.16% was seen on the screen, totaling a rally of 14.5% in two days to the last traded price of INR 411, by 2:13 PM IST. 

Image Description: Daily chart of IGL showing a symmetrical triangle breakout

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However, it's not just the rally that’s catching all the attention but the crystal clear breakout from a symmetrical triangle on the daily chart. The breakout from this chart pattern generally propels the stock (on the breakout) or torpedoes (on breakdown), allowing traders to capture a decent one-sided move. 

The longer the time a stock spends in forming the pattern, the better the chances of a breakout as a long time helps to contract the volatility of the stock to a greater extent. Hence, more of a volatility squeeze prior to the breakout leads to more of an impending volatility expansion. This volatility expansion is the key reason behind the rally/plunge as soon as the stock moves out of the upper/lower trendline. 

In the case of IGL, the stock spent a decent 5 months inside this symmetrical triangle formation which is a very bullish sign. According to the pattern’s target system, the stock gave a breakout at around INR 390 today and the next level to which the stock might rally is INR 480, which depicts a decent upside potential of around 16% from the CMP of INR 411. 

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