SBI features as Bollinger Band Squeeze Pick

The stock of State Bank of India 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 ‘three inside up’ candlestick pattern as on the weekend of June 5, 2020, and thereafter, gradually surged up to the level of Rs 202.50. Considering the weekly timeframe, the stock is trading in a contracting consolidation for the last four 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 weekly pivot and short-term moving averages, i.e. 20-day EMA and 50-day EMA. The leading indicator, 14-period daily RSI, hovers in a neutral region since the last 12 trading sessions. The average directional index (ADX), which shows the strength of the trend, is below 25-mark.  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 zone of Rs 185-Rs 187 level is a crucial support area and the level of Rs 195-Rs 197 is a resistance zone. A sustainable move on either side would lead to a trending move.