IRCTC features as Bollinger Band Squeeze pick

The stock of Indian Railway Catering & Tourism Corporation Limited (IRCTC) 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 had formed a Dragonfly Doji candlestick pattern as on the weekend of March 27, 2020, and thereafter, witnessed a pullback rally. The pullback was nearly 106 per cent from the low of Rs 774.65, which was registered on March 26, 2020. However, after registering a high of Rs 1,595, the stock witnessed a contracting consolidation.

Since the last 15 weeks, the stock is trading in the range of Rs 1,500-Rs 1,320. With this sideways price action, the Bollinger Bands, which was developed on the basis of the last 20 period’s volatility, have contracted on both the weekly and the daily timeframe. This is an early sign of a bigger move.

Among the momentum indicators, the RSI hovers in the neutral region on both the weekly and the daily timeframes, without any bias. The daily stochastic is also oscillating in the range of 65-25 for the last 23 trading sessions. 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 1,330-Rs 1,320 level is a crucial support area and the level of Rs 1,430-Rs 1,460 is the resistance zone. A sustainable move on either side would lead to a trending move.