LT features as Bollinger band squeeze pick

Larsen & Toubro 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 hammer like pattern near double bottom zone as on the week ended February 15, 2019 and thereafter formed sizeable bullish candle for four consecutive weeks. Considering the weekly time frame, for the last four weeks, the stock is trading in contracting consolidation and has formed four indecisive candles. However, as of now, the price action has narrowed substantially and the stock is likely to give consolidation breakout in the coming days.

The major trend of the stock is bullish as it is trading above its 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 6.54, 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. 1,361- Rs. 1,370 level will be the crucial resistance for the stock as it the confluence of downward sloping trendline and short-term 20-day EMA. A follow-through move above this level would lead to an extension of the pull-back toward Rs. 1,425, followed by Rs. 1,460. While on the downside, the zone of Rs. 1,336- Rs 1,330 will act as immediate support as it is the confluence of horizontal support and long-term 200-day EMA, failure to hold this support would lead to further correction up to the level of Rs. 1,280, followed by Rs. 1,250.