Recently this stock has given a major breakout by closing above Rs 201 levels and it is trading with positive trend. A strong line with green color is indicating continuation of the current bullish trend.
What is Line Break Chart?
Line break charts are sentiment indicators similar to Renko Chart, Point and Figure etc and they show charts with minimised noise as compared to a regular candlestick chart. A clue to understanding these charts is in the name; these are a type of breakout chart. They are distinctive because they only show significant price moves. Significant price moves occur when the closing price is higher or lower than the preceding bars.
Three line break charts are based solely on the closing price and do not display any intraday movements. This is based on the idea that the closing price is the most important price of the day. In this system, each bar is referred to as a line. As with all charting techniques, chartists should employ other technical analysis tools to confirm or refute their findings on Three Line Break charts.
Why to Buy JSW Steel?
If you look closely at the below chart, you can see that each line follows on directly from the previous line. A short reversal can only occur when the market has closed below the low of the previous 3 lines. A long reversal can only occur when the market has closed above the high of the previous 3 lines.
Buy SignalRecently this stock has given a major breakout by closing above Rs 201 levels and it is trading with positive trend. A strong line with green color is indicating continuation of the current bullish trend. At the same time JSW Steel has given trend reversal buy earlier by forming 3 line breakout patterns which is also conductive to recent up move. We suggest buying in this stock, considering bullish technical parameters discussed above.
Figure.1. Line Break and Buy signal on JSW Steel
As per one of the method of Line Break chart one can use previous swing line for profit booking. These levels are standing around Rs 245 and should provide immediate resistance on higher side, moving further Rs 260 will attract more profit bookings. So one can consider profit booking near Rs 245 and higher side towards Rs 260 mark.
Entire bullish view negates on a breach of immediate support zone and in a case of JSW Steel, we will consider Rs 193 as a stop loss level closing basis.
We recommend buying JSW Steel around Rs 215 with a stop loss of Rs 193 for higher targets of Rs 245/266 as indicated in above chart.
The author is Head - Technical Research at Narnolia Financial Advisors Ltd.
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