Technical Bits: IRB features as Bollinger Band squeeze pick

IRB Infrastructure Developers 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 Doji candle as on weekend of May 4, 2018 and thereafter marked the sequence of lower tops and lower bottoms till its 52-week level. Considering the weekly time frame, from the last four weeks, the stock is trading in a 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 bearish, as the stock is trading below its 50-day EMA,100-day EMA and 200-day EMA. The 14-period daily RSI is currently quoting at 48.47, and it is trading above its 9-day average. The daily stochastic has recently given a positive crossover. The daily MACD stays bullish as it is trading above its zero line.

Going ahead, it’s important for the stock to sustain and close above the resistance zone of Rs. 96-Rs 98.50 level. A sustainable move above the level of Rs. 98.50 is likely to open up gates for further rally towards the levels of Rs. 103, followed by Rs. 111. While on the downside, Rs. 87- Rs 86 is likely to act as major support as upward sloping trendline support is placed in that region.