Sun Pharma features as Bollinger band squeeze pick

Sun Pharmaceutical Industries was picked by our Bollinger Band squeeze scanner which suggests that the stock is near a consolidation breakout. 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 stock had formed Adam and Adam double bottom pattern and gives neckline breakout on July 12, 2019 and thereafter the stock gave a rise up to its multiple resistance zone of Rs. 445 to 440. The stock could not breach the zone and for the last three weeks. However, as of now, the price action has narrowed substantially and the stock is likely to give consolidation breakout in the coming days.

The long-term trend of the stock is negative, as the stock is trading below its 100-day EMA and 200-day EMA. The indicators and oscillators are too poor to comment on. The Average Directional Index (ADX) indicator on the daily time frame quoted around 13.85, which suggests no strength in any directional momentum.

Going ahead, it’s important for the stock to sustain and close above the resistance zone of Rs. 440-445 level. A sustainable move above the level of Rs. 445 is likely to open up gates for further rally towards the levels of Rs. 460, followed by Rs. 475. While on the downside, the stock has strong support in the zone of Rs. 410-405 level.