SBIN: Contracting Triangle in progress

A triangle forms when the price action narrows over several price swings. In SBIN, on the daily scale, the contracting triangle is in progress for the last four weeks. SBIN bounced sharply from its support zone of Rs. 250-Rs. 245 per share. The stock witnessed profit booking near its psychological resistance Rs. 300. The profit booking halted near its 50 per cent Fibonacci retracement level of upmove, which started from October 26, 2018’s low to the high of November 5, 2018. After this profit booking, the stock witnessed contracting consolidation which looks like a contracting triangle. 

The price has reached near the apex point of the contracting triangle, next week it is likely to give a breakout. From the last two weeks, the stock is having a relatively low volume which is one of the characteristics of the contracting triangle. The 14-period day RSI is quoting around 52.92 and other indicators and oscillators are also in the contracting mode. 

The triangle can be a continuation or a reversal pattern. Although, more often it is a continuation pattern. In case, the stock manages to close above Rs. 300, it may touch levels of Rs.325-Rs 335, while if it closes below the level of Rs. 270, it may open gates for a further downside towards the level of  Rs. 250.