Emami features as Bollinger Band Squeeze pick

The stock of Emami 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 bullish engulfing candlestick pattern as on the weekend of April 03, 2020, and thereafter, marked the sequence of higher tops & higher bottoms. From the low of Rs 130.95, which was registered on March 30, 2020, the stock has witnessed over 253 per cent upside. However, after registering a high of Rs 461.40, the stock slid into a period of consolidation.  

Since the last 19 trading sessions, the stock is oscillating in the range of Rs 436.85-Rs 393.80. With this sideways price action, the Bollinger Bands, which was developed on the basis of the last 20 days’ volatility, have contracted on both the weekly and the daily timeframe. This is an early sign of an explosive move.  

Currently, the stock is trading above its 20-day EMA (419.90), 50-day EMA (402.55), 100-day EMA (337.70) and 200-day EMA (371.90), which indicates a medium and long-term uptrend.  

Talking about the indicators, the daily RSI is oscillating in the range of 65-55 for the last 19 trading sessions. Further, the average directional index (ADX), which shows the strength of the trend, is below the mark of 20 and it is in a falling mode. This clearly indicates that there is an absence of strength in the stock. Other indicators are also mirroring the same image. 

Talking purely about the trading levels, the zone of Rs 394-Rs 390 level is a crucial support area, and the level of Rs 433-Rs 440 is a resistance zone. A sustainable move on either side would lead to a trending move.