Tech Mahindra features as Bollinger Band squeeze pick

Tech Mahindra 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 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 reversal spinning bottom candlestick pattern as on weekend of August 02, 2019 and, thereafter, marked a sequence of higher tops and higher bottoms. Considering the weekly time frame, for the last five 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 consolidation breakout in the coming days.

The short and medium term trend is bullish, as the stock is trading above its weekly pivot and also above 20-day EMA, 50-day EMA and 100-day EMA. Daily strength indicator RSI continues to remain flat above its reference line since last five trading sessions, indicating absence of strength. But the stochastic oscillator has already given positive crossover, indicating upside momentum.

Going ahead, it’s important for the stock to sustain and close above the resistance zone of Rs. 718-723 level. A sustainable move above the level of Rs. 723 is likely to open up gates for further rally towards the levels of Rs. 750, followed by Rs.770. While on the downside, the stock has strong support in the zone of Rs. 697-690 level.