IDBI, Bollinger Band Squeeze pick

IDBI bounced almost 30 per cent from its previous support zone and then it has been trading in a narrow contracting trading range since early October. This stock recently occurred in our Bollinger Band Squeeze scanner which suggests that consolidation breakout is near.

From the last 8 weeks, the stock is trading with relatively low volume. 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 14-period day RSI of the stock is quoting around 47.65 and it has already given a negative crossover. The MACD histogram is also below the zero line. All the price damages happen when these indicators are below the zero line.

A consolidation breakout or breakdown below some important support/resistance level with supportive volumes will lead to the major advance or decline. The stock has two major hurdles to cross; one is 200-day exponential moving average and the second is its previous strong resistance zone at Rs 62- Rs 65. For the short-term, Rs. 56 will act as a minor support.