Tata Consultancy Services features as Bollinger Band Squeeze pick

The stock of Tata Consultancy Services Limited was picked by our Bollinger Band squeeze scanner, which suggests that the stock is near a consolidation breakout. Bollinger Band squeeze occurs, when 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 formed a reversal spinning bottom like candlestick pattern as on the weekend of March 20, 2020 and thereafter, witnessed nearly 42 per cent pullback rally. Considering the weekly timeframe, for the last three 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.

Currently, the stock is trading above its 50-day EMA and 100-day EMA level. The leading indicator RSI hovers on the daily timeframe in the neutral region without any bias and the daily ADX is also below 25 mark. This indicates the lack of a clear trend. Other indicators are also mirroring the same image.

Talking purely about the trading levels, the zone of Rs 2,000-Rs 1,985 level is a crucial support area and the level of Rs 2,190-Rs 2,230 is a resistance zone. A sustainable move on either side would lead to a trending move.