Canara Bank features as Bollinger Band Squeeze pick

Canara Bank 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.

The stock has given a downward sloping trendline breakout as on June 01, 2020, and thereafter, witnessed almost 33 per cent pullback rally. The stock has registered a high of Rs 118.30 as of June 24, 2020, and after that, it is trading in contracting consolidation for the last five weeks.

Due to the narrow range, Bollinger Bands have contracted on both the weekly and the daily timeframe, which indicates an early sign of a bigger move. However, as of now, the price action has narrowed substantially and the stock is likely to give a consolidation breakout in the coming days.

Currently, the stock is trading below its short and long-term moving averages, i.e. 20-day EMA, 50-day EMA, 100-day EMA and 200-day EMA. The daily chart shows that it has been continuously trading below its 200-day SMA level since July 2019. Among the momentum indicators, the 14-period daily RSI is currently quoting at 46.08 and it is trading below its nine-day average. The daily MACD stays bearish as it is trading below its zero line and signal line.

Talking purely about the trading levels, the zone of Rs 98-Rs 97 level is a crucial support area and the level of Rs 105-Rs 106 is a resistance zone. A sustainable move on either side would lead to a trending move.