SBI Life near consolidation breakout

SBI Life gets picked up by our Bollinger Band Squeeze scanner, suggesting that a consolidation breakout is expected in the near term. 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, stock spent almost 11 weeks in contracting consolidation. However, the volumes are too poor to suggest any momentum. The Average Directional Index (ADX) indicator was quoting around 17.70 on a daily time frame and it is in a rising mode, which suggests the stock is likely to give directional movement in the near term.

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, Rs. 610 level will be a crucial resistance for the stock. A follow-through move above this level would lead to the extension of the pull-back toward Rs. 645, followed by Rs. 685. While on the downside, the level Rs. 530 will be the immediate support, failure to hold this support would lead to further correction up to the level of Rs. 490.