Buy, Avoid, Sell, Or Hold? RBL Bank

JC Parets
December 28, 2021

Today we're introducing a new series of posts that we will include in our general analysis.

We're calling this the BASH Series. What does this mean and what do we do?

We look at stocks in the market that are experiencing extreme moves, and we share our views. So we will tell you what we'd do: Buy, Avoid, Sell, or Hold. And that's how we arrive at BASH (you have to make acronyms that make a word. Just sticks better, so bear with it. Haha!)

Today we're here to discuss RBL Bank Bank. So let's do just that.

Often we see several examples of stocks going through an extreme move for several reasons. Most often it involves new information that was unknown before. This happens in both cases, positive and negative.

Going by the move we saw in RBL Bank, here is our view and what we'd do if we had made a choice.

Unfortunately, traditional understanding leads an average participant to believe that any correction is almost always a buying opportunity. Well, not always. And we'll tell you why.

Let's take a look at the chart first. Here is the price move that RBL has been going through. You'll notice that for the longest time, the price has only been correcting. This, with barely any relief rally. When you look at this chart, anyone can tell that is far from its highs. The top has been in place for a while so we're not identifying if this topping out. We're trying to see what the current mood is telling us.

Even without the price move this week, one could tell that this is certainly a stock to stay away from. But post the breakdown, the view only becomes stronger. While the first target was achieved on day 1 itself, at 135, the negative trend in the price hasn't changed.

Notice the price history too. Even at a time when Banks were doing well, RBL was the underperformer and couldn't shrug off the negative sentiment. It is futile to park investments in such stocks which underperform even as the market is performing well. That should be the first red flag!

Next up, look at how the price has put in consistent lower highs and lower lows. That's an established bearish trend. So the buying would ideally come in only and ONLY when the latest prior high has been breached. Until then, there's really not much to do here.

Let's assume that despite the fall, the risk management levels were consistently ignored in this trade (criminal offense there, btw). A breakdown below the level of 155 definitely does it for the trade. There's no reason to be positive even as the most recent strong support was broken.

So, whats the verdict?

Buy? A BIG NO.

Avoid? Definitely YES

Sell? With a risk management level of 155, and targets near 135 and 105. Yes.

Hold? No. Just no.

This was the first in a series of posts where we will highlight the most notorious moves in the market. Anything specific you'd like for us to write about? Reach out to us!

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

Allstarcharts Team

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