GNFC features as Bollinger Band Squeeze pick

The stock of Gujarat Narmada Valley Fertilisers & Chemicals 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.

Considering the daily timeframe, the stock has formed a spinning top candlestick pattern as of August 25, 2020, and thereafter, witnessed a minor correction. The correction is halted near its 34-day EMA level. After forming a low of Rs 185.20, the stock has again witnessed an upside momentum but it failed to move above its prior high of Rs 232.50 level. However, since the last 12 trading sessions, the stock is oscillating in the range of Rs 219.45-Rs 203.05 and mostly formed indecisive candles.

Along with this sideways price action, if you look at Bollinger Band, which was developed on the basis of the last 20 days, volatility has also contracted. Generally, whenever the bands are contracting, it is an early sign of an explosive move.

The major trend of the stock is bullish as it is trading above its medium and long-term moving averages, i.e. the 50-day EMA, 100-day EMA, and 200-day EMA but the indicators are suggesting a sheer lack of momentum. The leading indicator, RSI, is oscillating in the range of 55-50 since the last 13 trading sessions. The trend strength indicator ADX is currently quoting at 11.12 and it is in a falling mode. This clearly indicates that there is an absence of strength in the stock. Besides, other indicators are also mirroring the same image.

Talking purely about the trading levels, the zone of Rs 203 -Rs 200 level is a crucial support area and the level of Rs 218-Rs 220 is the resistance zone. A sustainable move on either side would lead to a trending move.