Maruti Interior Products Ltd. [SME] Based on Rectangle Pattern B
1. Pattern Analysis
- Rectangle Pattern:
- Timeframe: 2.5 Years
- Description: The stock was trading within a well-defined rectangle pattern, bounded by ₹70 (support) and ₹130 (resistance). This prolonged consolidation indicated indecision in the market, with neither bulls nor bears gaining dominance. The breakout above ₹130 marks the conclusion of this range-bound phase and signals the beginning of a potential upward trend.
2. Volume Analysis
- Volume Behavior:
- During the consolidation phase, volume remained relatively subdued, reflecting a lack of strong conviction from market participants.
- The breakout above ₹130 was accompanied by a significant surge in volume, confirming the participation of buyers and validating the breakout.
3. Price Action Analysis
- Resistance Levels:
- ₹130: The breakout level and previous upper boundary of the rectangle.
- Support Levels:
- ₹100: Psychological support and a potential pullback level if the stock retraces.
- ₹70: Long-term support level, the lower boundary of the rectangle.
- Candlestick Behavior:
- The breakout candlestick is large and bullish, indicating strong buyer momentum and a clear breakout from the consolidation zone.
4. Validation of Bullish Signal
- The breakout above ₹130 is supported by high volume, a critical factor for validating the breakout. This indicates strong buying interest and reduces the likelihood of a false breakout.
- The rectangle's long duration (2.5 years) adds weight to the breakout's significance, as longer patterns often lead to more substantial price movements.
5. Target Setting
- Rectangle Pattern Target:
- Height of the rectangle = ₹130 - ₹70 = ₹60.
- Target = ₹130 + ₹60 = ₹190.
- Incremental Targets:
- Target 1: ₹160 (+23%).
- Target 2: ₹190 (+46%).
6. Entry and Stop Loss
- Entry Levels:
- Primary Entry: Above ₹130 after the breakout confirmation.
- Pullback Entry: Near ₹100–₹110 if the stock retraces to test the breakout level.
- Stop Loss:
- Place a stop loss at ₹100, below the breakout zone and above the mid-range level.
7. Trade Setup Summary
- Entry Levels:
- Above ₹130 for momentum traders or near ₹100–₹110 on a pullback for swing traders.
- Targets:
- Target 1: ₹160 (+23%).
- Target 2: ₹190 (+46%).
- Stop Loss: ₹100.
8. Final Notes
The breakout of Maruti Interior Products Ltd. from a 2.5-year rectangle pattern is a strong bullish signal, supported by significant volume. The stock presents a favorable risk/reward ratio for traders. A pullback to ₹100–₹110 would offer a better entry point for long-term investors. For the uptrend to remain intact, the price must sustain above ₹130.
