BEML Ltd: Bollinger Band squeeze pick

BEML Ltd 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 'one white soldier' candlestick pattern as on weekend of November 2, 2018 and, thereafter, it bounced till its 100-week EMA and 20-week EMA. Considering the weekly time frame, since last four weeks, the stock has been 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 major trend of the stock is bearish as it is trading below its 20-day EMA, 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 is quoting around 7.82, 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. 947-Rs 952 will be the crucial resistance for the stock. A follow-through move above this level would lead to an extension of the pull-back toward Rs. 1020, followed by Rs. 1040. While on the downside, the zone of Rs. 885-Rs 880 will act as immediate support as the upward sloping trendline is placed in that region. Failure to hold this support would lead to further correction up to the level of Rs. 870, followed by Rs. 850.