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NSE Bank: Immediate support is placed at 17900 levels

HDFC Sec | 01 Dec, 2014  | Follow Author | Add to my Favourites 
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Current Observation:

- Daily timeframe: The banking sector has been in an excellent up trend in the last couple of months, as the sector prices have zoomed in the positive sequence of higher tops and bottoms.

- After forming a recent swing low of around 17890 on 26th Nov, the sector has moved up sharply on Friday and made a new swing high of around 18615 levels. This is positive indication for the underlying and at the same time there is a chance of the formation of new higher top for near term.

- We observe an upside breakout of the parallel channel lines (green upward sloping parallel lines) this week and the sector has just closed above it as per closing basis.

- The daily momentum oscillator like RSI has turned up around 75 levels, and that is inline with the formation of negative divergence pattern. This could raise concern on the strength of bulls to take sector prices further high.

- Among sector participants, major stocks like SBIN, Axis Bank, ICICI Bank, HDFC Bank, Kotak Bank and PNB have witnessed sharp upmove during this week, after moving into consolidation. Other mid cap stocks like Yes Bank, Federal Bank, Indusind Bank, BOB, BOI, Indian Bank, Andhra Bank, ALBK, KTK Bank, IDBI Bank have all moved up sharply during this week.

Weekly Timeframe: The banking sector has witnessed an excellent vertical type upmove in the last couple of months, as the sector moved up in one way without showing any corrections (as per weekly timeframe chart).

- This week saw the banking sector moved above the strong overhead resistance of upward sloping intermediate term resistance line around 18070 levels (brown up sloping line, which is connected from the intermediate top of 10774- mid of Jan 2008) and closed above it.

- The banking sector has been moving up in the positive sequence of higher tops and bottoms in the last one year and current up trend as per weekly timeframe is suggesting a possibility of new higher top.

- Weekly short term momentum oscillator like 14 period ROC has been showing weak signs and is not inline with the upward trending sector price. This divergence could be a sign of warning for bulls at higher levels.

- Monthly timeframe:
The longer term chart of monthly of Banking sector is showing an intermediate upmove in the sector for the last many months.

- This month’s sharp upmove has led to the upside breakout of the intermediate resistance of upward sloping trend line (blue line connected from the intermediate tops of 10775-Jan 2008 and 13303 Nov 2010) and closed above it.

- Since the nature of the hurdle as per monthly timeframe is significant with regards to an uptrend and this upside breakout needs to be confirmed with follow through upmove or sustain above it.

Summing Up:

- The detailed study of NSE Banking sector is demonstrating an excellent up trended move, but upside momentum is lacking with the current upmove and this is not a good sign for the positive trend.

- The current upside breakouts of hurdles as per weekly/monthly timeframe needs to be watched carefully for confirmations or sustainable moves. However, such prolonged upmoves at the upside breakouts of significant hurdles more often trip and that leads to a formation of false breakouts.

- The whole hosts of banking large cap and mid cap stocks are looking attractive for fresh long positions. Creation of long positions in these stocks has to be deployed with strict stoploss and booking profits at the earliest.

- However, the next upside region to be watched is around 18700-18750 and immediate support is placed at 17900 levels for next week.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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