Technical Bits: HSCL features as Bollinger band squeeze pick

Himadri Speciality Chemical 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 a low level 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 dark cloud cover candle as on the weekend of January 19, 2018 and thereafter witnessed correction. The correction is halted near its long-term moving average, i.e. 200-week EMA and bounced back up to its multiple resistance zone of Rs. 124-Rs 126. The stock could not breach the zone and from the last seven weeks hovering around the resistance zone. 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-day EMA, 50-day EMA,100-day EMA and 200-day EMA. The 14-period daily RSI is currently quoting at 45.68, and it is trading below its 9-day average. The fast stochastic line is also trading below its slow stochastic line, which suggests bearish bias. The Average Directional Index (ADX) indicator on daily time frame quoted around 13.94 and it is in a rising mode, which suggests the stock is likely to give a directional movement in the near-term.

In the near-term, the zone of Rs. 121- Rs.122 is likely to act as an immediate resistance as the downward sloping trendline is placed in this region. A decisive close above this level would lead to an extension of the pull-back toward Rs. 137, followed by Rs. 147. While on the downside, the zone of Rs. 115-112 will be the immediate support, failure to hold this support would lead to further correction up to the level of Rs. 105.