Bajaj Finserv features as Bollinger Band Squeeze pick

Bajaj Finserv 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.

The stock has formed a reversal hammer candlestick pattern as on the weekend of May 29, 2020, and thereafter, witnessed a pullback rally up to the level of Rs 6,710. Considering the weekly timeframe, the stock is trading in consolidation for the last five weeks. 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 20-day EMA (6,302.50), 50-day EMA (6,137.95), and 100-day EMA (6,196), which indicates a medium and a long-term uptrend. However, the leading indicator, RSI on the daily timeframe, hovers in a neutral region without any bias since the last 25 trading sessions. The daily ADX is below 20 mark. This clearly indicates that the stock lacks a clear trend. Other indicators are also mirroring the same image.

Going ahead, it is important for the stock to sustain and close above the upward sloping trendline resistance, which is currently placed in the zone of Rs 6,460-Rs 6,480 level. A sustainable move above the level of Rs 6,480 is likely to open up gates for a further rally towards its prior high of Rs 6,570, followed by Rs 6,710. While on the downside, the stock has strong support in the zone of Rs 6,300-Rs 6,250 level, as it is the confluence of upward sloping trendline support and 20-day EMA level.