Case Study: Kotak Mahindra Bank Breaks Long-Term Trendline (W)

Sep 21

Pattern: Long-Term Trendline Break
Stock: Kotak Mahindra Bank
Timeframe: Weekly
Status: Trendline broken with volume confirmation

Pattern Characteristics:

The stock has tested the long-term trendline 5 times in the past, failing to break through.
Finally, it has broken above the trendline with a significant spike in volume, indicating a strong momentum shift.

Key Observations:

Resistance Trendline: The stock has been consistently rejected at this trendline for months but now shows a clear breakout.
Volume Confirmation: The breakout was supported by a noticeable increase in trading volume, which adds confidence in the validity of the move.

Breakout Implications:

1) Bullish Confirmation:
A clean break above the long-term trendline suggests that the stock could enter a new bullish phase.
The volume spike suggests strong buying interest.

2) Watch for Retest:
Sometimes, stocks retest the broken trendline. If it holds as new support, that’s another strong signal of continued upside.

Trading Strategy:

Entry: Consider entering on a pullback or retest of the broken trendline, or ride the momentum if it continues.
Stop Loss: Place a stop loss below the trendline in case of a false breakout.
Target: Set targets based on previous resistance levels or recent highs on the weekly chart.