Technical Bits: Essel Propack features as Bollinger Band squeeze pick
Essel Propack 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 a reversal dark cloud cover pattern as on weekend of November 24, 2017 and thereafter entered into a corrective phase. The correction halted at 50 per cent retracement of its previous uptrend (Rs 12.13-Rs 157.78). Since then, the stock is trading with gradual higher tops and higher bottoms. Considering the weekly time frame from the last seven 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 consolidation breakout in the coming days.
The short and long-term trend for the stock is positive, as the stock is trading above its 50-day EMA, 100-day EMA and 200-day EMA. The indicators and oscillators are too poor to comment on. The Average Directional Index (ADX) indicator on the daily time frame quoted around 12.24, 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. 130- Rs. 131 level will be the crucial resistance for the stock as it is the confluence of downward sloping trendline resistance and short term 20-day EMA level. A follow-through move above this level would lead to an extension of the pull-back toward Rs. 138, followed by Rs. 145. While on the downside, the zone of Rs. 128- Rs 126 will act as immediate support as it is the confluence of horizontal trendline support and short-term 50-day EMA, failure to hold this support would lead to further correction up to the level of Rs. 123, followed by Rs. 115 level.