INDOSTAR features as Bollinger Band Squeeze pick

IndoStar Capital Finance 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 volatility falls to lower levels and Bollinger Band narrows. A volatility contraction or narrowing of the bands can foreshadow a significant advance or decline.

The stock had formed a reversal morning star candlestick pattern as on weekend of January 3, 2020 and thereafter, bounced sharply up to the level of Rs 297. Considering the weekly time frame, for the last six weeks, the stock is trading in a contracting consolidation. However, as of now, the price action has narrowed substantially and the stock is likely to give a consolidation breakout in the coming days.

The major trend of the stock is bullish as it is trading above its long and short-term moving averages, i.e. 20-day, 50-day, 100-day and 200-day EMAs. The leading indicator, 14-period daily RSI is currently quoting at 58.82 and it is in super bullish zone. But the daily ADX is declining since the last 20 trading sessions. This indicates the lack of a clear trend.

Talking purely about the trading levels, the zone of Rs 269-Rs 266 level is a crucial support area and the level of Rs 294-Rs 297 is the resistance zone. A sustainable move on either side would lead to a trending move.