Top/Down Take: Jammu & Kashmir Bank (J&KBANK)

JC Parets
November 10, 2021

Today we're here to discuss with you our process of Top/Down Analysis. As we go on our way, we'd like to take you along on this journey as well.

With the market sectors passing the baton of strength to one another, one sector stood out. PSU banks not only stood out in terms of the outperformance that we're witnessing but also simply because they are PSU Banks. When was the last time one was bullish PSU Banks?

Those who've had their fair share of capital loss in the past have had something to do with PSU banks. For sure.

But has the tide turned? Are we entering a bull market when it comes to this sector? Let's take a look!

Let's start at the very beginning, a very good place to start. Nifty 500.

This is the stock universe we follow and hence this is our starting point. Quite obviously, the price has run into resistance close to 16,000. While the price finds its way, there are always some pockets doing better than the others. And we're here to identify just that.

Here's the star of the show!

Nifty PSU Bank Index has been on an absolute tear and has moved past its resistance at 2,700. With this move, the price has moved past the high made in 2019. Big news for PSU. Why is it big news? Just look at the price memory close to 2,700. For the price to absorb all the overhead supply in that region and sustain above it successfully is most definitely big news!

We tend to see underperformance from this sector, but just maybe, that's about to change.

As the price holds above the level of 2,700, the next level we're tracking is 3,445. 3,445 is a resistance that comes up in the interim, right before the major resistance of 3,730. Our line in the sand is 2,700.

On a relative basis, PSU Bank is attempting to move past its resistance, as we speak. However, momentum is in support of the current move, something which was lacking in the latest attempt.

So who's the final candidate here today? Probably not a name you were expecting - Jammu and Kashmir Bank!

J&K Bank has done quite a bit in the last few weeks.

First up, the price moved past the level of 30 and held its ground. We saw a pullback and a subsequent move too, making this breakout a typical textbook breakout.

Secondly, the price broke out above the downward sloping trendline and continued to hold above it. This is the more crucial move. Breaking out of a downward sloping trendline is a very good sign of a strong trend reversal. What we're waiting to see is whether this move continues without a pause.

We are bullish above the level of 30 with a target close to 81. Those who prefer a tighter risk management level can track 37 to keep a check. 37 is the point of breakout from the downward sloping trendline.

Notice how similar the relative strength chart is to the price chart above. The ratio broke out above its downward sloping trendline. With this move, the strength in this stock is clearly visible.

It's been a while since PSU Banks have consistently displayed strength, and this is just one of those times! This was our pick from this sector. What are you tracking?

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

Allstarcharts Team

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