Cholamandalam Financial Holdings features as Bollinger Band Squeeze Pick

The stock of Cholamandalam Financial Holdings 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.  

The stock has formed a hammer candlestick pattern as on the weekend of October 23, 2020 and thereafter, witnessed nearly 55 per cent upward momentum in just five weeks. After registering a high of Rs 580, the stock is consolidating in a small range. Due to the narrow range, the Bollinger band (average period of 20 and standard deviation-2.00) has contracted substantially. This clearly indicates that the stock is likely to witness volatility expansion in the next few trading sessions.   

Talking about the moving averages, the stock is currently trading above its short and long-term moving averages, i.e. 20-day, 50-day, 100-day & 200-day EMAs, and these moving averages are exactly in an ascending order, which suggests that the trend is strong. The leading indicator i.e. the 14-period daily RSI is in a super bullish zone since the last 33 trading sessions. The RSI has recently given a positive crossover. The daily stochastic oscillator is also suggesting a bullish strength as per cent K is above the per cent D.  

Talking purely about the trading levels, the zone of Rs 500-Rs 506 level is a crucial support area and the level of Rs 555-Rs 565 is the resistance zone. A sustainable move on either side would lead to a trending move.