Technical Bits: Mindtree features as Bollinger band squeeze pick

Mindtree Limited 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 a reversal bullish engulfing candle near double bottom zone as on January 11, 2019 and thereafter marked the sequence of gradual higher tops and higher bottoms. Considering the weekly time frame, for the last six weeks, the stock is trading in 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 long-term trend for the stock is positive, as the stock is trading above its 20-day EMA, 50-day EMA,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 9.58, which suggests no strength in any directional momentum.

A consolidation breakout or breakdown below some important support/resistance level with supportive volumes will lead to a major advance or decline. For the short-term, the zone of Rs. 995 Rs. 1,000 level will be the crucial resistance for the stock as the downward sloping trendline is placed in that region. A follow-through move above this level would lead to an extension of the pull-back toward Rs. 1,040, followed by Rs. 1,080. While on the downside, the zone of Rs. 972- Rs 960 will act as immediate support as it is the confluence of upward sloping trendline support and short-term 50-day EMA, failure to hold this support would lead to further correction up to the level of Rs. 942, followed by Rs. 919 per share.