Britannia Industries: Bollinger band squeeze pick

Britannia Industries was picked by our Bollinger Band squeeze scanner which suggests that the stock is near a consolidation breakout. The Bollinger Band squeeze occurs when volatility falls to low levels and the Bollinger Bands narrow. A volatility contraction or narrowing of the bands can foreshadow a significant advance or decline.

The stock had formed bearish engulfing candle as on the weekend of February 8, 2019 and thereafter witnessed correction. The correction is halted near its short-term moving average, i.e. 50-week EMA and it coincides with downward sloping trendline support. Since the stock is trading with gradual higher tops and higher bottom. From the last four weeks, the stock is trading in contracting consolidation. However, as of now, the price action has narrowed substantially and the stock is likely to give a breakout in the coming days.

The short and long-term trend is still positive, as the stock is trading above its 20-day EMA, 50-day EMA,100-day EMA and 200-day EMA. However, the indicators and oscillators are too poor to suggest any momentum. The Average Directional Index (ADX) indicator on the daily time frame quoted around 7.56, which suggests no strength in any directional momentum.

A consolidation breakout or breakdown below some important support/resistance level with supportive volumes will lead to the major advance or decline. For the short-term, Rs. 3,200 level will be the crucial resistance for the stock. A follow-through move above this level would lead to an extension of the pull-back toward Rs. 3,320, followed by Rs. 3,410. While on the downside, the level Rs. 3,000 will be the immediate support, failure to hold this support would lead to further correction up to the level of Rs. 2,900.