Hexaware: Bollinger Band squeeze pick

Hexaware Technologies Ltd was picked by our Bollinger Band squeeze scanner on the weekly time frame, which suggests that the stock is close to 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.

After registering its 52-week low, the stock is trading in the range of Rs 300-Rs 374 since last six months. Currently, the stock is hovering around downward sloping trendline resistance.  As of now, the price action has narrowed substantially on weekly scale and the stock is likely to give consolidation breakout in the coming days.

The near term trend is positive, as the stock is trading above its weekly pivot and above its 20-day EMA, 50-day EMA and 100-day EMA. The leading indicator 14-period RSI is currently quoting at 56.48, and it is trading above its 9-day average. The fast stochastic line is also trading above its slow stochastic line, which suggests a bullish bias. The daily MACD stays positive as it is trading above its zero line. The Average Directional Index (ADX) indicator on the daily time frame is quoted around 5.66, 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 a major advance or decline. For the short-term, the zone of Rs 357-Rs 363 will act as a crucial resistance for the stock as it is the confluence of downward sloping trendline and long-term 200-day EMA. A follow-through move above this level would lead to an extension of the pull-back toward Rs 375, followed by Rs 405. While, on the downside, the zone of Rs 337-Rs 334 will act as an immediate support as the downward sloping trendline is placed in this region. Any failure to hold this support would lead to further correction up to the level of Rs 310.