Indian Stock Picks >> Indian Stock Pick -
Prism Cements
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Indian Stock Pick - Prism Cements (03rd February
2006)
This stock pick was
one of the BUY recommendation in our
Trend
Trading Picks Newsletter
Prism Cements, which had been consolidating over the
last 3 months has finally broken out of its symmetrical
triangle pattern on large volumes.
Breakout of triangle patterns such as these on heavy
volumes, after a period of consolidation indicates
accumulation in that stock.
Trading Recommendation
BUY now at or around the current market price of Rs.
24.00 with a stoploss at 20.00.
Profit Target
As Prism Cements has broken out of its consolidation
after a period of 3 months we expect this stock to test
its previous high of Rs. 28.00 to 30.00 in the short
term.
Symmetrical (contracting)
Triangles
Symmetrical triangles can be characterized as areas
of indecision. A market pauses and future direction is
questioned. Typically, the forces of supply and demand
at that moment are considered nearly equal. Attempts to
push higher are quickly met by selling, while dips are
seen as bargains. Each new lower top and higher bottom
becomes more shallow than the last, taking on the shape
of a sideways triangle. It's interesting to note that
there is a tendency for volume to diminish during this
period.
Eventually, this indecision is met with resolve and
usually explodes out of this formation (often on heavy
volume.) Research has shown that symmetrical triangles
overwhelmingly resolve themselves in the direction of
the trend.
With this in mind, symmetrical triangles in my opinion,
are great patterns to use and should be traded as
continuation patterns.
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