Tata Motors features as Bollinger Band Squeeze pick

Tata Motors Limited has been picked up by our Bollinger Band Squeeze scanner, which suggests that the stock is near a consolidation breakout. The 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 formed a bullish pin bar as on March 24, 2020, and thereafter, witnessed almost 88 per cent pullback rally. After registering the high of Rs 119.15, the stock is trading in contracting consolidation since the last 33 trading sessions. Also, on the weekly timeframe, the stock has formed five indecisive candles. 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 short and medium-term moving averages, i.e. 20-day EMA, 50-day EMA and 100-day EMA. The leading indicator, RSI, hovers in the neutral region on both, the weekly and daily timeframes, without any bias. The trend strength indicator ADX is below 25 mark on both the weekly and the daily timeframe. This clearly indicates that there is an absence of strength in the stock.

Going ahead, it is important for the stock to sustain and close above the resistance zone of Rs 110-Rs 111 level as downward sloping trendline resistance is placed in this region. A sustainable move above the level of Rs 111 is likely to open up gates for a further rally towards its prior high of Rs 119.15, followed by Rs 132. While on the downside, the stock has strong support in the zone of Rs 101-Rs 100 level, as it is the confluence of upward sloping trendline support as well as 50-day EMA level.