Trendline Breakout: Penny Stock Rallies ‘54% in 3 Days’!

  • Stock Market Analysis
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The broader market index Nifty 50 remained volatile in today’s session, opening almost flat then falling to a noticeable low for the day, and finally rallying back to close at the day’s high. Many pockets saw some profit booking with only two sectoral indices closing the session on a positive note. 

However, if looked at some specific counters there was no dearth of action. Many stocks went against the weak market sentiments and a not-so-good sectoral breadth and delivered sky-high returns to investors. But one stock making all the heads turn is a micro-cap cement company, Burnpur Cement Ltd (NS: BRCL ) Limited. 

The company’s market capitalization is less than INR 100 crores (as it is a penny stock) and is engaged in the business of manufacturing and sales of cement. Looking at the financials, there is some improvement being noticed in FY22 with a INR 58.98 crores consolidated loss which is a 25.5% reduction from the FY21 loss of INR 79.2 crores. The revenue also jumped 58.88% YoY to INR 200.14 crores which is the highest annual revenue, at least since 2013.   

Image Description: Daily chart of Burnpur Cement showing a trendline breakout

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The share price of Burnpur Cement has been on a massive run over the last three sessions. The stock has already clocked a gigantic gain of over 54% from INR 4.2 on Monday to INR 6.5 on Wednesday. Despite being a penny stock that are highly volatile and can easily depict erratic moves, this kind of buying frenzy is on another level. 

The volume for the day shot up to a multi-year high of 3.1 million shares, the highest one-day volume since November 2017. As the stock was clearly trending down prior to the rally, this ongoing price surge has not only reversed the trend (as it surpassed its falling trendline resistance) but also taken the stock close to the multi-year high of INR 8.5, above which a new breakout would arise. While looking at the weekly chart, the stock seems to be easily making its way up to the current 52-week high. 

As this is a penny stock, trading this kind of counter is highly risky and these stocks can easily be manipulated. The possibility of artificial inflation of prices would always remain high with such counters hence, long holders must maintain a strict exit level as the stock might also come crashing down with the same force.

It would probably be irrelevant to talk about the support levels in these micro-cap companies. However, the nearest support is present at INR 4, which is almost 38% down from the current level.  

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  • Thanigachalam Somu @Thanigachalam Somu
    nice to note this. how do you monitor the scripts ? Do u hv any software to identify scripts with breakout.
    Like 0
    • Aayush Khanna/ @Aayush Khanna/
      Yes Thanigachalam, I use Investing Pro to find breakout stocks.
      Like 0
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  • Ketan Desai @Ketan Desai
    Thanks boss
    Like 1
  • Khajakhiar As @Khajakhiar As
    Like 0
  • Vipin Madan @Vipin Madan
    Absolutely right.
    Like 0

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