NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
A stock trades in a range with support at Rs 480 and resistance at Rs 520. It closes decisively at Rs 535 on sharply higher volume. Which interpretation is most consistent with technical analysis?
This is a bullish breakout. The close at Rs 535 is decisively above the Rs 520 resistance and is backed by high volume, which confirms it. Under the role-reversal principle, the former resistance at Rs 520 is likely to turn into support.
- ABullish breakout above resistance, with the old resistance at Rs 520 likely to act as new supportCorrect
- BBearish breakdown, with Rs 535 now acting as support
- CA false signal because volume should fall on breakouts
- DConfirmation that the stock will return to Rs 480 immediately
Explanation
A decisive close above resistance on high volume is a confirmed bullish breakout. By the role-reversal principle, broken resistance often becomes support. Rising volume strengthens, not weakens, the signal.
Did you get it right without looking?
One question tells you little. A timed set on Technical Analysis shows your real accuracy, how long you take and where you lose marks.
More Technical Analysis questions
- A stock closes at Rs 120 on day 1 and day 2 closes at Rs 130. Using a 3-day simple moving average, closes on days 3, 4 and 5 are Rs 125, Rs …
- A 10-day exponential moving average uses a smoothing multiplier of 2/(N+1). If the previous EMA is Rs 100 and today's close is Rs 122, what …
- A stock has risen from Rs 200 to Rs 300 in an uptrend. It then retraces 50% of this entire advance. Using the retracement idea from Fibonacc…
- A stock's closing prices over a 14-day period show an average gain of Rs 3 on up days and an average loss of Rs 1.5 on down days, with the a…
- In Bollinger Bands with standard settings, the upper and lower bands are placed relative to the middle band at:
- A stock's closing prices over the last five days are Rs 100, Rs 104, Rs 108, Rs 106 and Rs 112. What is the 5-day simple moving average?