FII’s favorite action is a “triangular breakout”; Investors are targeting a 30% rally!

A stock trading near all-time highs is one of the best candidates for continued bullish momentum. Some investors might argue that these stocks are generally very overbought and therefore might prefer to avoid them, and there is nothing wrong with that. However, if a stock is approaching its lifetime high, fueled by a breakout in volatility, then this could be a perfect recipe for high probable momentum, strong enough to break previous highs.

This is exactly what is happening with the share price of Max Healthcare Institute Limited (NS:) which is a provider of home healthcare services including patient care, health services and medical services. hospitals. The company has a market capitalization of INR 36,720 crore and its shares are about 2.1 times more volatile than the index.

The stock remained on FII’s radar and they significantly increased their stake from 14.59% in March 2022 to 23.24% in June 2022. It is rare to see such a notable increase in stake in one quarter. In fact, mutual fund holdings have seen an even larger increase, from a mere 4.83% holding in March 2021 to 19.21% in June 2022. However, out of 50.6% of the participation of promoters, 25.9% is promised, which is a little worrying. .

Image description: Max Healthcare Institute weekly chart with volume bars at the bottom

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After hitting an all-time high of INR 458.05 in January this year, the stock has faced some profit bookings, in sync with the wider markets. However, it did not drop much and took the support around INR 325 and bounced back. Since then, its range has narrowed and the stock has turned sideways, causing a symmetrical triangle chart pattern to form. This pattern reflects the stock’s volatility contraction which provides fuel for a breakout. The longer the stock stays in this triangle pattern, the higher the fuel it would get on the breakout.

On Friday, shares of Max Healthcare Institute broke above trendline downside resistance of around INR 400 and closed comfortably above it. A 9.14% rally to INR 413.3 was all that was needed for the stock to prepare to break its previous lifetime high. In fact, a weekly close above resistance usually produces an even deeper breakout (which happened in this case).

The volume on the day of the breakout is also of significant importance and determines the quality of the breakout. On Friday, the stock recorded a volume of 9.46 million shares, about 611% more than the 10-day average volume of 1.33 million shares. Hence, good volume confirmation is also there. The closest level the stock could rally to is around INR 530, which represents an upside potential of around 28% to 30%.