Three Stocks On The Verge Of A Multi-year Breakout

Hello, everyone! Today, let's dive into the fascinating world of three stocks that have either already seen a multi-year breakout or are on the verge of one. Understanding this phenomenon through price action analysis, without resorting to obsessing over countless indicators, can be an insightful way to analyze stocks.

Key Takeaways:

1. Pharma and PSU sectors have shown promising multi-year breakouts.
2. Importance of combining technical analysis with fundamentals in stock selection.
3. The multi-timeframe analysis can provide a comprehensive understanding of stocks' behaviour.

Disclaimer

Before getting started, it's crucial to emphasize that the following analysis shouldn't be perceived as any stock recommendation. Instead, it's a lesson in analyzing price action. The author doesn't engage in intraday trades but does indulge in swing or medium-term trades with a well-defined risk-reward ratio, a stop loss, and a target level. And stock selections for investment purposes aren't purely dependent on technical analysis; they're backed up with fundamental analysis as well.

Multi-year breakout example: Pharma Stock

The Pharmaceutical sector has been a topic of hot discussion among experts, on the news, and across social media. In 2023, the sector outperformed Nifty, and expectations remain bullish for 2024. Let's explore this through the lens of a specific pharma stock – GlaxoSmith Cline (GSK).

After nearly a decade-long range-bound movement, GSK seems to have broken out. One indicator of the breakout is the robust volumes seen in the last three months compared to previous months. However, a crucial determinant of the breakout's sustainability is the closing price. If GSK manages to close above the breakout level of 1910, that would confirm the breakout.

Eyeing a breakout: PSU Banking

The PSU Banking space is another buzzing sector, getting ample attention on news circuits and social media. The PSU Banking index hasn't seen significant movement for several years. However, in December 2023, it finally broke out of a 13-year consolidation. Just like in Dow theory, significant consolidations usually result in a strong trend in the direction of the breakout. Thus, the index could potentially reach around 9,800 from a technical perspective.

Using Canara Bank (CanBank) as an example, it's interesting to see the stock break out its downward trend recently. However, the stock is currently testing its immediate previous high, and a closing above that level would confirm a plausible multi-year breakout.

Conclusion

That was a breakdown of two multi-year breakout cases. If you are eager to know about the third stock from the fertilizer sector that has already given a multi-year breakout, head over to our website to read a detailed blog post on it. Coupling this technical analysis, or price action analysis, with an understanding of basic fundamentals can equip you to make more informed decisions when selecting stocks. Always remember, knowledge is your most potent investment.