RBL Bank features as Bollinger Band Squeeze pick

RBL Bank 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.

The stock has given a horizontal trendline breakout as of June 09, 2020, and thereafter, witnessed a pullback rally. The pullback rally was nearly 114 per cent from the low of Rs 101.55 and is halted near the 38.2 per cent Fibonacci retracement level of its prior downward move (Rs 391.20-Rs 101.55). Considering the daily timeframe, the stock has been oscillating in a narrow range since the last 23 trading sessions.

Due to the narrow range, the Bollinger band (average period 20 & standard deviation 2.00) has contracted substantially on the daily as well as on the weekly chart. It’s amply clear that the stock is likely to witness volatility expansion in the next few trading sessions.

Further, the momentum indicators are also mirroring the same thing. The leading indicator i.e. the 14-period RSI is hovering in the neutral region since the last 23 trading sessions. The ADX indicator, which shows strength, is also quoting at 10.33 on the daily chart and 11.04 on the weekly chart. This clearly indicates that there is an absence of strength in the stock. 

Going ahead, the zone of Rs 168-Rs 165 level is a crucial support area and the level of Rs 182-Rs 186 is a resistance zone. A sustainable move on either side would lead to a trending move.