Dhani Services Ltd. Based on Rectangle Pattern Breakout
1. Pattern Analysis
- Rectangle Pattern:
- Timeframe: 2 Years
- Description: The stock has been consolidating within a rectangle pattern, with a well-defined resistance at ₹75 and support at ₹40. This prolonged sideways movement indicates accumulation and a potential buildup for a significant move.
- The breakout above ₹75 marks the end of the consolidation phase and the start of an upward trend, confirming a bullish breakout.
2. Volume Analysis
- Volume Behavior:
- During the consolidation phase, volume remained low, which is typical for a rectangle pattern.
- A notable volume spike during the breakout, as seen recently, signifies increased market participation and validates the breakout.
3. Price Action Analysis
- Resistance Levels:
- ₹75: The previous resistance and breakout level.
- ₹90–₹100: Immediate target zone based on historical price action.
- Support Levels:
- ₹60: Potential retest zone after the breakout.
- ₹40: The lower boundary of the rectangle, serving as the final support.
- Candlestick Behavior:
- The breakout was marked by a strong bullish candlestick with a close near its high, indicating momentum.
- Recent higher highs and higher lows further confirm bullish price action.
4. Validation of Bullish Signal
- The breakout above ₹75 is supported by a clear volume spike, showing increased demand.
- The long consolidation period adds reliability to the breakout, as prolonged patterns tend to yield stronger moves.
5. Target Setting
- Rectangle Pattern Target:
- Height of the rectangle = ₹75 - ₹40 = ₹35.
- Target = ₹75 + ₹35 = ₹110.
- Incremental Targets:
- Target 1: ₹90 (+20% from ₹75).
- Target 2: ₹110 (+46% from ₹75).
6. Entry and Stop Loss
- Entry Levels:
- Primary Entry: Above ₹75 after the breakout.
- Pullback Entry: Near ₹60 if the stock retests the breakout level.
- Stop Loss:
- Place a stop loss at ₹60, below the potential pullback zone.
7. Trade Setup Summary
- Entry Levels:
- Above ₹75 for momentum traders.
- Near ₹60 for a pullback entry.
- Targets:
- Target 1: ₹90 (+20%).
- Target 2: ₹110 (+46%).
- Stop Loss: ₹60.
8. Final Notes
Dhani Services Ltd. has successfully broken out of a 2-year rectangle pattern, with strong volume confirming the breakout. The long-term consolidation suggests that the breakout has significant potential to drive the stock higher, making it an attractive opportunity for traders. Close monitoring of price action around ₹75 and ₹60 is recommended for entry and to manage risk effectively.
