[Premium] Banks Get Oversold

Here's the Nifty Bank Index rolling over and confirming a failed breakout and bearish momentum divergence. We've spoken about that at length already, but what I wanted to highlight today is the fact that momentum has now transitioned into a bearish range by breaking below 30.

Strong uptrends do not get oversold and strong downtrends do not get overbought...

Click on chart to enlarge view.

Needless to say, this breakdown is not positive for Financials/Banks or the broader market. We would have much rather seen prices consolidate through time to digest gains and work off their bearish momentum divergences, but the market doesn't care what we want.

Here's the largest component of the sector, HDFC Bank, getting oversold and failing to reclaim broken support near 2,320.

Meanwhile we've seen other components like Bajaj Financial Services Ltd. in a similar position, already breaking down to new lows after failing to reclaim support. Is HDFC Bank next? Looks likely.

Nifty PSU Banks, which were improving on an absolute and relative basis, are seeing a failed breakout in their largest component, State Bank of India.

We were hoping to see prices in this subsector build on their improvements from the last few months, but that doesn't seem to be the case.

Rangebound messes are likely to remain the norm in Public Sector Banks.

The Bottom Line: The recent action in Financials has been damaging, and while their longer-term trends on an absolute and relative basis remain intact, the risk remains to the downside over the near-term. If we're going to see the major indices dig in at support and work their way higher, we need to see Financials stabilize and lead that charge.

Until then, the market's got the heavy weight of the banks on its back.

Thanks for reading and let us know if you have any questions!

Allstarcharts Team