The methodology at a glance
At its core, the Edwards and Magee approach is about identifying key price levels (support and resistance) and watching what happens when price reaches those levels. The trading signal comes from how price behaves at resistance — and crucially, whether volume confirms the move.
Kasauti's Magee Breakout Filter
- Price within 5% of the 52-week high — testing the most significant resistance level
- Volume ratio ≥ 1.5× average — above-average volume confirms institutional participation
- Positive day change — price is moving up, not just churning near resistance
- Price above the 50-day moving average — short-term trend supports the breakout
Who are Edwards and Magee
Robert D. Edwards and John Magee co-authored what is widely considered the foundational text of technical analysis. First published in 1948, it was the first rigorous attempt to catalogue and systematise chart patterns — head and shoulders, double tops and bottoms, triangles, flags, channels — and to explain how volume confirms or denies the validity of price movements.
Magee was the practitioner; Edwards was the theorist. Together they created a framework that has been continuously updated and remains in print nearly eight decades later. The underlying principle — that price action at key levels, confirmed by volume, reveals the balance of supply and demand — is timeless and universal.
Key principle: A breakout without volume is a lie. Edwards and Magee hammered this point: when price breaks above resistance, volume must expand. If it doesn't, the breakout is likely to fail. Volume is the fuel; without it, the move has no legs.
How Kasauti implements it
The Magee button applies a client-side filter that surfaces stocks showing the exact pattern Edwards and Magee described: price pushing against 52-week resistance with volume confirmation and a positive trend backdrop. These are real-time breakout candidates — the stocks where supply is being overwhelmed by demand right now.
Kasauti Insight · Nuances for Indian markets
Indian stock volume patterns have a specific quirk that makes Edwards & Magee's volume-confirmation rule especially important: foreign institutional investor (FII) flows create non-stationary volume baselines. In periods of heavy FII buying, average daily volume on NSE stocks can run 30–50% higher than during FII selling phases. This means a 'normal' volume day in one period might register as a 'high volume' breakout in another.
The practical fix: when applying Magee's methodology on NSE, use the volume ratio (today's volume divided by the trailing 50-day average) rather than absolute volume numbers. Kasauti computes this automatically — any stock showing a 1.5× ratio or higher has genuine institutional interest regardless of whether the broader market is in a high-volume or low-volume regime. This adjustment is critical for Indian markets in ways it might not be for more uniform foreign markets.