AstraZeneca Pharma India features as Bollinger Band Squeeze pick

The stock of AstraZeneca Pharma India Limited has been picked up by our Bollinger Band Squeeze scanner, which suggests that the stock is near a consolidation breakout. 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.

After forming the low of Rs 1,885 as on the weekend of March 27, 2020, the stock has witnessed nearly 164 per cent upside momentum. However, on September 08, 2020, the stock had formed a sizeable bearish candle and thereafter, witnessed correction.

Considering the daily timeframe, the stock is consolidating in the range of Rs 4,389.95-Rs 4,126.30 since the last 17 trading sessions. During this consolidation phase, the volume activity is below the 50-day average volume. Due to a narrow range, the Bollinger band, which has developed on the basis of the last 20-days’ volatility, has contracted significantly. This is an early indication of the expansion in volatility.

Talking about the indicators, the daily RSI hovers in a neutral region since the last 16 trading sessions. The average directional index (ADX), which shows the strength of the trend, is consistently making lower lows since the last 21 trading sessions. This clearly indicates that there is an absence of strength in the stock. Other indicators are also mirroring the same image.

Talking purely about the trading levels, the 50-day EMA is likely to act as a crucial support zone for the stock, which is currently placed at Rs 4,058 level. On the upside, the zone of Rs 4,360-Rs 4,400 is a resistance zone. A sustainable move on either side would lead to a trending move.