NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
A stock trades in a rectangle between support at Rs 200 and resistance at Rs 240. It closes decisively at Rs 241 on high volume. Using the usual measuring rule for a rectangle breakout, what is the minimum price target?
The minimum target is Rs 280. The rectangle is Rs 40 tall, from Rs 200 to Rs 240. Projecting that height upward from the breakout level of Rs 240 gives the target. Rs 280 is therefore the usual measured move for this pattern.
- ARs 260
- BRs 280Correct
- CRs 240
- DRs 320
Explanation
The rectangle height is 240-200 = 40. For an upside breakout the target is the breakout level plus the height: 240+40 = 280. Rs 260 uses half the height, and Rs 320 wrongly doubles the height.
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