Top/Down Take: State Bank of India (SBIN)

As the name suggests, the Top/Down approach means that we look at the big picture data first, and then funnel it down to the stock-specific idea.

First up, always look at the universe that we track. Nifty 500 has been clocking new all-time highs and has been trying to get out of its congestion. While it looks like it may have made that shift successfully for now, we'd like to keep an eye on this one. Just to make sure there's follow-through here.

If the underlying trend continues, then 16,040 is the level to track. If not, we're watchful of 12,260 on the downside.

Up next is the sector-specific chart. Here we're checking Nifty PSU Bank to see if there's any headroom in the current move. At the moment the overhead resistance is placed at 2,645. That would be the next logical level for the sector to halt at. And it has done that in the past on two occasions.

A breach of 2,645 however, could take the index much higher towards 3,445. So that's something to keep an eye on.

On a relative basis, the PSU Banks have turned the tide and are now making higher highs higher lows. This, after years of a secular downtrend. While that is positive, this move needs to sustain at higher levels as the market rally progresses. That would be the true test of this reversal.

The next step is to identify a stock that is strong on an absolute and relative basis.

State Bank of India is a crowd favorite, and off late, it has reason to be! After breaking out of a monster base in February this year, the stock slid right back beneath its support. Post that we've seen a recovery in SBIN as well with PSU Banks finding more strength in this move.

As the stock attempts to break out above its all-time highs, the indicator is reaching out for the momentum territory again. A move above the minor resistance of 400 is positive for the price.

We are bullish above the level of 400, with a target near 512.

Taking a look at SBIN relative to PSU Banks, one look makes it clear that SBIN has maintained its strength throughout. While there may be dips and corrections, the stock has managed to pull through and outperform for a long time now.

The market mess hasn't sorted itself out yet, but PSU Banks have been displaying a renewed strength. Once you dig a little deeper, you can slowly but surely arrive at the outperformer of that particular segment and analyze whether that fulfills your risk/reward strategy.

This Tuesday we had our Members-Only Monthly Conference Call. If you haven't already, take a look at the recording.

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

Allstarcharts Team