Bajaj Auto features as Bollinger Band Squeeze Pick

Bajaj Auto 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 Dragonfly doji like candlestick pattern on the weekend of August 02, 2019, and thereafter, it has marked the sequence of higher tops and higher bottoms. Considering the weekly timeframe, for the last five 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 a consolidation breakout in the coming days.

The major trend of the stock is bullish, as it is trading above its weekly pivot and above its long-short term moving averages, that is, 20-day, 50-day, 100-day and 200-day. The leading indicator RSI hovers on daily timeframe in the neutral region without any bias and the daily ADX is currently quoting at 9.04. This indicates the lack of a clear trend. Other indicators are also mirroring the same image.

Talking purely about the trading levels, the zone of Rs 3,120-Rs 3,100 level is a crucial support area and the level of Rs 3,290-Rs 3,300 is the resistance zone. A sustainable move on either side would lead to a trending move.