The stock of Bharat Petroleum Corporation 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 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 formed a reversal spinning bottom candlestick pattern as on the weekend of March 27, 2020 and thereafter, it has witnessed a pullback rally. The pullback rally is halted near 50 per cent Fibonacci retracement level of its prior downward move (Rs 549-Rs 252) and coincides with the 50-day EMA level.
Considering the weekly timeframe, since the last five weeks, the stock is consolidating in the range of Rs 402.05-Rs 355.25 and has formed five indecisive candles. This clearly suggests that the momentum is waning at higher levels. 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 below its weekly pivot and below its long and short-term moving averages, i.e. 20-day EMA, 100-day EMA and 200-day EMA. The leading indicator RSI on the daily time frame hovers in the neutral region without any bias since the last 13 trading sessions. The daily ADX is below 20 and +DI is just above–DI by a narrow margin. This clearly indicates that the stock lacks a clear trend. Other indicators are also mirroring the same image.
Going ahead, an important zone to watch out would be Rs 396-Rs 400 on the higher side and Rs 368-Rs 365 on the downside. A break on either side would open doors for a directional move.