Search for:
  • Home/
  • Most Recent Stories/
  • PSU bank stocks: How to trade PSU bank stocks after recent rally? Anand James does the chart reading

PSU bank stocks: How to trade PSU bank stocks after recent rally? Anand James does the chart reading

NEW DELHI: Following a sharp rally in PSU bank stocks, pullback seems likely in over stretched stocks like PNB, Bank of India, IOB and Central Bank, says Anand James, Chief Market Strategist at Geojit Financial Services.

“The recent rallies in the PSU bank index have pushed the 14-D RSI above 70. A Doji candle formed in the daily time frame warrants indecision,” he says. Edited excerpts from an interview:

Unlock Leadership Excellence with a Range of CXO Courses

Offering College Course Website
IIM Lucknow IIML Chief Marketing Officer Programme Visit
Indian School of Business ISB Chief Technology Officer Visit
Indian School of Business ISB Chief Digital Officer Visit

We saw Nifty getting huge support from banks and IT stocks last week. Do you see strong resistance coming around the 20,200-level or will the momentum continue towards 20,500?
We had gone in last week with 20230 or 20600 as the upside objectives, and were reasonably satisfied with what Nifty came to achieve despite all traditional indicators blaring signals of being overbought. This has transpired on the back of low volatility expectations, as indicated by subdued VIX through the week. However, a shortened week ahead (Tuesday being a trading holiday), with Fed rate decision arriving in the middle of the week presents the ideal environment for bears to regroup, and challenge all those counters which had surged unchecked so far. We will test the premises of this construct by watching if Nifty manages to float above 20180. If unable to do so, 19550 could emerge as a downside objective, but the prospects of 20600 would continue to be very much alive, as long as 20000 holds.

While both Sensex and Nifty have hit new highs, Nifty Bank is yet to drive past its previous peak of 46,369.50 touched on 24 July. How to trade the banking index now?
Some of the smaller stocks in Nifty Bank, like PNB, IDFC First and Bandhan bank have rallied about 15% more than their respective prices seen when Nifty last recorded its highest level on 20th July. Meanwhile, the 33% stocks in the index which contribute to the bulk of weightage in the index, are yet to cross their respective peaks, which have been one reason for index traders to remain expectant of larger gains shortly ahead. However, this is a circular argument, and we are reluctant to follow this, especially as Bank Nifty seems reluctant on approach of previous record peak, and RSI which had remained true to Nifty bank as an oscillator, unlike Nifty, is at extremes, suggesting an imminent pull back. We would be comfortable to resume the long bias on dips below 45500.

While other PSU stocks succumbed to bears, PSU banks are unstoppable. How do you explain Dalal Street’s love with sarkari bank stocks. Do some chart reading for us please.
Gains in PSU Bank index were majorly driven by Bank of Baroda, Canara Bank, PNB, Union Bank which together contribute around 55% to the index. In fact, the benchmark indices’ rise to record peaks have encouraged traders to look for stocks that have been laggards. PSU banks are not strictly laggards, given the recent run up, but apart from SBI, IndusInd Bank and Bank of Baroda which are less than 10% away from their respective record peaks, the rest of constituents of the PSU Bank index are 52 to 83% away from their respective lifetime highs. Meanwhile, the recent rallies in the PSU bank index have pushed the 14-D RSI above 70. A Doji candle is formed in the daily time frame warrants indecision. Thus a pullback seems likely in overly stretched stocks like PNB, Bank of India, IOB and Central Bank while Canara Bank, Bank of Baroda, Union Bank and Indian Bank are poised to attract buying interest.

ITI Ltd came out of nowhere to rally over 50% and become the best performing BSE500 stock in the week on announcement of new laptops and micro PCs. Do you see more steam left in the next few days?
A 50% rise in a short time frame is always a tough act to continue. But ITI’s rise has come after a long drawn consolidation that had kept prices under 2020 peaks, until now. So, that gives traders the confidence to chase prices even higher, despite last week’s exhilarating climb. One may look for 250 as the nearest price objective in a one to two month time frame, with stop loss placed either near the retracement support of 172, or near 155, the base of the bull candle.The momentum in IRFC shares slowed down after Tuesday’s sell-off in the broader market. How would you trade the stock in the week ahead?
Rejection trades dominated last week indicating a potential end to an exhilarating phase of uptrends in the stock. Bounce back was seen from key retracement supports though, but we would move comfortably to look at further declines, to perhaps 57, before considering re entry.

Give us your top trading ideas for the week


View : Buy

Entry range : 433 – 425

Targets : 457 – 474

Stoploss : 414

The stock has been within the trading range of 375 and 427 since May and recently has managed to broke out of the range. This breakout was accompanied by significant volumes which is painting a rosy picture for the stock in the near term. Also, the 14 day RSI remains strong above 65 along with a Flag pattern breakout in the weekly charts all favoring a move towards 457 and thereafter towards 474 in the near term. All longs may be protected with stoploss placed below 414.


View : Buy

Entry range : 338 – 332

Targets : 350 – 364

Stoploss : 322

The stock has been on an upside since 2021 which saw many higher highs and higher lows. The recent upside, which lasted for two months, saw some correction recently which helped it to attract bulls leading to a declining trendline breakout in daily time frame. Also, the MACD forest has shown signs of exhaustion which is leading us to believe that this breakout is going to continue towards 350 and 365 in the near term. All long positions may be protected with stoploss placed below 322.

Source link