GAIL features as Bollinger Band Squeeze pick

Gail (India) Limited has been picked up 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 Adam and Adam double bottom pattern near 52-week low level. Currently, it is hovering around the neckline of double bottom pattern since last eight trading sessions. However, as of now, the price action has narrowed substantially and the stock is likely to give a breakout in the coming sessions.

The short term trend is bullish, as the stock is trading above its weekly pivot and also above 13-day EMA and 20-day EMA. The leading indicator 14-period RSI is currently quoting at 54.26 and it is trading above its 9-day average. The MACD stays bullish as it is trading above its zero line and signal line. Moreover, the positive divergence is clearly visible between daily RSI, daily stochastic and stock price movement, which suggests limited downside.

Going ahead, it’s important for the stock to sustain and close above the resistance zone of Rs. 133-134 level. A sustainable move above the level of Rs. 134 is likely to open up gates for further rally towards the levels of Rs. 140, followed by Rs. 150. While on the downside, the stock has strong support in the zone of Rs. 120-119 level.