[Chart(s) of The Week] Two Major Breakouts
First up is Larsen & Toubro, which has failed time and time again to break above the 1,430 level over the last 18-months, but prices have finally gapped through resistance and seen some follow-through.
With this stock accounting for 1/3 of the Infrastructure Index, it's clear that there's now a tailwind for continued improvement in the sector which has lagged but is now attempting to break back above long-term resistance near 3,425. If Larsen & Toubro is above 1,430 the odds of that breakout eventually are significantly better than if it's not.
Click on chart to enlarge view.
Next is the State Bank of India, which represents 1/3 of the Nifty PSU Bank Index. It's no secret that the Public Sector Bank Index has significantly lagged the rest of the Financial Services sector and the broader market, but a breakout in its largest component is a significant tailwind for continued improvement in the space.
Both of these moves above resistance occurred on the back of "breakaway gaps", which are generally not filled and see immediate follow-through to the upside to mark the start of a new trend. Momentum also got overbought, confirming the strength of buyers supporting this move.
If these moves are the real deal, we will see Larsen & Toubro stay above 1,430 and State Bank of India above 355.
That also means a continued improvement for the remainder of the Infrastructure and Nifty Public Bank sectors, which would be a good start to the sector rotation needed to support the broader markets.
We'll be doing a deep dive for members into these areas of the market over the next few days to identify potential opportunities. For now, Members can check out the Chartbooks for our updated analysis.
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Allstarcharts Team