This is how you catch right breakouts| Kundan Prajapati

Summary

Kundan Prajapati presents a five-rule approach to reducing false breakouts in stocks. The central message is to trade confirmation, not excitement: wait for the breakout candle to close, check volume and delivery participation, assess the preceding price structure, and consider entering on a confirmed pullback rather than chasing the initial move.

Five-Rule Breakout Framework

1. Wait for the candle to close

   • Avoid entering before the breakout candle closes. An intraday move above resistance may reverse before the close.
   • Confirm the breakout on the same timeframe used for the analysis. For example, if the setup is based on a weekly chart, confirm it on the weekly chart rather than buying an early daily move.
   • Missing the initial breakout is acceptable; a retest or later setup may offer another entry.

2. Require a strong close

   • The candle body should close roughly 40–50% above resistance.
   • Avoid candles with a pronounced upper shadow, which may indicate rejection near the breakout level.

3. Confirm with volume and delivery

   • The breakout candle’s volume should be at least 40–50% above the average volume of the prior 20–30 candles.
   • For swing trades, check delivery volume as well as total volume, since total volume includes intraday trades.
   • The speaker recommends avoiding breakouts where delivery is below 40%. Delivery above 40–50% is presented as a more favorable sign of holding participation.

4. Assess the price structure before the breakout

   • Prefer a stock that reaches resistance and consolidates there, suggesting that selling supply is being absorbed.
   • A stock that surges straight into resistance may be more prone to stall or move sideways after breaking out.

5. Consider a pullback entry

   • Rather than buying the breakout immediately, wait for price to retest the former resistance, which may act as support or a demand zone.
   • Enter only after a bullish reversal signal at that area, such as a hammer, bullish engulfing, bullish harami, or morning star.
   • The presenter says a pullback can reduce the risk of being caught in a false breakout and shorten the required stop-loss distance, while keeping the target unchanged.

Numbers and Examples Cited

• The presenter says applying the filters could improve breakout accuracy from roughly 50–60% to 70–75%. This is a claimed estimate, not independently verified performance data.
• Aditya Birla Capital: A breakout reportedly gained about 11% over roughly one and a half months, including during a weak market. The breakout candle’s delivery share is cited as 57.2%.
• Alicon: A breakout with a volume spike but only 31% delivery reportedly failed to gain momentum and struggled or moved sideways.
• Usha Martin: After consolidating near resistance, the stock reportedly rose 115% in five or six candles.
• ICICI Bank: A breakout reportedly produced a move of about 30% in six or seven candles, followed by several months of sideways trading.
• L&T Finance (LTF): The presenter compares an approximately 8% stop on a breakout entry with an approximately 4% stop on a pullback entry.
• In another pullback example, the transcript cites a breakout stop of 4.27% versus about 2.8% for the pullback; the wording around those figures is unclear.

Assets and Instruments Mentioned

• Stocks/securities: Aditya Birla Capital, Alicon, Ratnamani, Sumitomo Chemical India, Usha Martin, ICICI Bank, and Larsen & Toubro Finance (LTF)
• Index: Nifty 50
• Other terms: Indian equities, swing trading, breakout and pullback trades. No specific ETF, bond, commodity, or cryptocurrency strategy is discussed.

Cautions and Disclosures

• The presenter warns against FOMO entries, trading breakouts without confirmation, and assuming any setup guarantees success. Pullbacks may help manage risk but do not eliminate it.
• The return and accuracy figures are examples or estimates reported by the presenter, not audited or independently verified results.
• No explicit spoken “not financial advice” disclaimer appears in the provided subtitles.

Presenters and Source

Kundan Prajapati is the trading strategy presenter, and Shubh Bhai is the host/interviewer. The examples include the stocks listed above. The video channel is Upsurge Club.