Adani Transmission features as Bollinger Band Squeeze pick

The stock of Adani Transmission Limited has been picked up by our Bollinger Band Squeeze scanner, which suggests that the stock is near a consolidation breakout. Bollinger Band Squeeze occurs when the volatility falls to low levels and the band narrows. A volatility contraction or narrowing of the bands can foreshadow a significant advance or decline.

After registering its all-time high of Rs 366.40, the stock has witnessed nearly 60 per cent correction within just 11 weeks. The correction is halted near the upward sloping trendline support. The stock has formed a spinning top like candlestick pattern as on the weekend of March 13, 2020, and thereafter, marked the sequence of higher tops & higher bottoms.

However, the stock is oscillating in the range of Rs 299.50-Rs 280.25 for the last four weeks. Due to the narrow range, the Bollinger band (average period 20 and standard deviation 2.00) has been contracted substantially on the daily chart. This clearly indicates that the stock is likely to witness volatility expansion in the next few trading sessions.

The major trend of the stock is bullish as it is trading above its weekly pivot and over its long and short-term moving averages, that is, 20-day, 50-day, 100-day, and 200-day EMAs and these moving averages are in an ascending order, which suggests that the trend is strong. Further, the leading indicator i.e. the 14-period daily RSI has given a positive crossover, which is also a bullish sign.

Going ahead, it is important for the stock to sustain and close above the resistance zone of Rs 298-Rs 300 level. A sustainable move above the level of Rs 300 is likely to open up gates for further rally towards the levels of Rs 330, followed by Rs 350. While on the downside, the stock has strong support in the zone of Rs 284-Rs 280 level.