Technical Bits: Amara Raja features as Bollinger Band Squeeze pick

Amara Raja Batteries Limited 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 reversal a Doji candle as on weekend of August 24, 2018 and thereafter marked the sequence of lower tops and lower bottoms till its 52-week low. Considering the weekly time frame, the stock had formed a reversal hammer like candle as on weekend of May 24, 2019 and since then the stock is trading in contracting consolidation. However, as of now, the price action has narrowed substantially and the stock is likely to give consolidation breakout in the coming days.

The short and long-term trend is negative, as the stock is trading below its 20-week EMA, 50-week EMA,100-week EMA and 200-week EMA. From a momentum oscillator perspective, the 14-period weekly RSI is currently quoting at 29.30, and it is in the bearish zone. The weekly MACD stays bearish as it is trading below its zero line and single line for the last 11 weeks.

In the near-term, the zone of Rs. 637- Rs. 650 is likely to act as an immediate resistance as it is the confluence of downward sloping trendline and 20-day EMA level. A decisive close above this level would lead to an extension of the pull-back toward Rs. 660, followed by Rs. 690. While on the downside, the zone of Rs. 605-595 will be the immediate support, failure to hold this support would lead to further correction up to the level of Rs. 570, followed by Rs. 555.