What is the Line Break Chart?
Line break charts are sentimental indicators similar to the Renco chart, point, and figure, etc, and they show charts with minimal noise compared to a normal candlestick chart. There is a clue in the name to understand these charts; These are a kind of breakout chart. They are typical because they only show significant price movements. Substantial price fluctuations occur when the closing price is higher or lower than the previous bars.
Three line break charts are based solely on closing price and do not display 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 represented as a line. As with all charting methods, chartists must use other technical analysis tools to confirm or disprove their results on three line break charts.
Why buy JSW Steel?
If you look closely at the chart below, you can see that each line follows directly from the previous line. Small reversals occur only when the market closes lower than the previous 3 lines. A long reversal only occurs when the market closes above the previous 3 lines.
The stock has recently given a big breakout by closing above the Rs 120 level and it is trading with a positive trend. The strong line with the green color indicates the continuation of the current bullish trend. At the same time, JSW Steel offered a pre-trend reversal purchase by designing 3 line breakout models, which could also serve as a recent move. We suggest buying in this stock considering the bullish technical parameters discussed above.
According to one method of line break chart, the previous swing line can be used for profit booking. These levels are around Rs 245 and should provide immediate resistance on the high side, moving Rs 260 will attract more profit bookings. So bookings of profits near Rs 245 can cross the Rs 260 mark.
The 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 the above chart.
author- Head Technical Research at Narnolia Financial Advisors Ltd.
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