Dr Reddys Laboratories feature as Bollinger Band Squeeze pick

The stock of Dr Reddy’s Laboratories 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 Morning Doji Star candlestick pattern as on March 20, 2020 and thereafter, bounced up to its 52-week high level. Considering the weekly timeframe, the stock is trading in consolidation since the last four weeks. However, as of now, the price action has narrowed substantially and the stock is likely to give a consolidation breakout in the coming days.

As the stock is near to its 52-week high, it is trading above all the short and long-term moving averages. The stock is meeting the criteria of Mark Minervini’s trend template. The current stock price is above both 150-day (30-weeks) and 200-day (40-weeks) moving average price lines. Moreover, 30 and 40-weekly averages are trending up and at the same time, they are in a desired sequence. Also, the current stock price is 60 per cent above its 52-week low and the current price is closer to 52-week high.

Among the momentum indicators, the 14-period weekly RSI, is currently quoting at 66.69 and it is in super bullish zone. The weekly MACD stays bullish as it is trading above its zero line and signal line. 

Going ahead, it is important for the stock to sustain and close above the resistance zone of Rs. 4170-4190 level. While on the downside, the stock has strong support in the zone of Rs. 3840-3810 level. A sustainable move on either side would lead to a trending move.