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How to Shortlist Breakout Stocks in the Indian Share Market in 5 Minutes

Submitted by admin on October 17th, 2024

Identify breakout stocks in the Indian share market to max out returns for investors. Breaking out occurs when a stock price surges over a significant resistance level with subsequently higher trading volumes. This is how, in five minutes every day, you will shortlist potential breakout stocks.

Step 1: Set Up A Daily Watchlist
This is the first constituent of your daily routine. Keep a watchlist of stocks you want to track day-in and day-out. To screen your stocks, you can use any of these screening tools at websites such as Screener.in or Moneycontrol by filtering stocks on the basis of various criteria. You might start with a diversified lot of stocks in disparate sectors, like technology, pharmaceuticals, and consumer goods. Diversification decreases your risk and captures more opportunities across the market.

Step 2: Breakout Criteria
With your watchlist in place, focus on finding breakout criteria.

Price Movement: You want stocks that have recently had the gap above significant resistance levels or hit new highs. A stock that closes above its previous day’s high is an early indication of a breakout.

Volume Rise: Care about trading volume. When the stock sees an unusual trading volume, that is usually 1.5 and 2 times more than its average, then it must be of interest, and you may be seeing a confirmation of potential breakout.

Step 3: Use Technical Indicators
To further filter your selection, use technical indicators in your research:

Moving Averages: Look for moving averages, especially 50-day and 200-day moving averages. That would be some indication when the price of a stock is trending above those lines. Now, if those short-term moving averages cross the top side of long-term ones, then that’s a golden cross, and you might have a breakout.

Relative Strength Index (RSI): This is a momentum oscillator that measures speed as well as change in price movements. Readings above 70 may indicate overbought conditions, whereas readings below 30 may indicate it may be oversold. For this breakout, you may want to concentrate your attention on stocks with RSIs reaching or crossing above 70 because such stocks have strong upward momentum.

Step 4: Market News & Sentiment
One must also be in the know of all the news pouring into the markets. These can be financial or sector-specific updates. There might be some earnings reports, product launches, or economic indicators that will start playing in your favour by changing the way the stock prices take a turn.

The next is social networking sites such as Twitter or StockTwits. These can give one real-time sentiment analysis, thus providing insight into how much public interest and investor enthusiasm there is for particular stocks.

Step 5: Final Shortlisting
In your last minute, review your findings to highlight 2-3 stocks that are likely to breakout based on breakout criteria. Focus on the current performance, what’s happening in the general market, and what’s going on with the news on these stocks.

To keep track, you can set price alerts on your trading platform for the shortlisted stocks. Upon the activation of the alert, you can immediately know major price movements during the trading day, so you wouldn’t miss some potential entry points.

Example Stocks to Watch
Of course, some stocks are always consistent winners, that is, they manifest in the breakout repeatedly, such as Reliance Industries Ltd., HDFC Bank Ltd., Tata Consultancy Services (TCS), Infosys Ltd., and Larsen & Toubro Ltd., such stocks that appear to be better-positioned for sustainable stability in the market influence of their share price.

Conclusion
You don’t have to spend a lot of time on shortlisting breakout stocks in the Indian share market. Following this structured approach and doing a bit of five minutes’ daily work, you will find breakout stocks very easily. Always remember you research and analyze before you make the investment decision as the stock market is unpredictable. Staying disciplined and being deliberate in practice over time should improve your ability to spot breakout stocks, which could lead to better investment choices.