PSU Banks Gatecrashed The Rally

JC Parets
February 18, 2021

You'd have to be a part of the market for quite some time to be able to claim that you witnessed a bull run in the PSU Banks sector. This sector is notorious for perpetual underperformance regardless of the market sentiment.

Well, maybe that's changing. Over the past two weeks, these hibernating stocks decided to wake up and join the party. Looks like they finally received the invite for the ongoing rally!

A move above 1,900 in the PSU Banks Index is crucial and here's why. This level has played the role of strong support for close to seven years. With the breach of this level in early 2020, the principle of polarity would mean that 1,900 would turn into stubborn resistance. The fact that PSU Banks has broken out of this resistance rather quickly, hints at the strength that's building in this index.

We are bullish above 1,900, for targets near 2,645 & 3,445.

Click on chart to enlarge view.

Relatively speaking, the PSU Banks Index has broken out of its resistance zone and is ready for the next leg of the rally. One could also say that there has been an inverted head & shoulders pattern breakout at the bottom which often act as strong reversal patterns.

Now let’s take a look at some actionable ideas at current levels that look attractive on the long side for the next few weeks and months.

While the PSU Banks have rallied significantly over the past week, we believe there could be more to this move.

Bank of India has broken out of an important level of 76. Notice how there is a lot of price memory at this level, acting as both support and resistance in the past. Such levels act as good indicators of inherent strength in the price and momentum.

We are bullish above the level of 76, with targets of 102 & 218.

Bank of Baroda looks like it's ready to breach the resistance of 85. The indicator is in a bullish momentum regime after a gap of 6 years! That ought to be something to look at!
We are bullish above the risk management level of 85, with targets of 102 & 138.

Canara Bank has absorbed the overhead supply at 150 and looks good for a move towards levels of 214 & 295. 150 will act as the risk management level.

Indian Overseas Bank has a different story to tell. While it has crossed its 2020 highs, the stock looks like its breaking out of a three-year base. We are bullish above the risk management level of 16, with a target near 32.

Last on this list is Punjab National Bank. PNB has knocked against the resistance of 41 on two occasions in the recent past. With the strong move in PSU Banks, we believe a move above 41 could take the price further towards 54 & 71. 41 will act as the risk management level.

While we have been bullish on the leader of the pack- SBI, the current move in PSU Banks could bode well for the other constituents as well. Is this a long-term trend reversal? Not yet. But this could be the beginning of a good move.

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

Allstarcharts Team

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