NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
A stock trades in a range with support at Rs 200 and resistance at Rs 240, forming a rectangle. It breaks out above Rs 240 on high volume. Using the measuring rule for a rectangle, what is the minimum price target?
The minimum target is Rs 280. The rectangle height is Rs 40 (resistance Rs 240 minus support Rs 200), and for an upside breakout this height is added to the breakout level of Rs 240. Rs 260 and Rs 320 use wrong multiples of the height.
- ARs 260
- BRs 280Correct
- CRs 320
- DRs 200
Explanation
Rectangle height = 240 - 200 = Rs 40. The target on an upside breakout is the breakout level plus the height: 240 + 40 = Rs 280. Rs 260 would add only half the height, and Rs 320 adds double the height.
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