Nifty PSU Bank index dips below 200-DMA after more than 2 years; what next?
Source: Business Standard
Following a sharp 3.5 per cent slump on Friday, the Nifty PSU Bank index was seen trading with a loss of another 1 per cent in trades on Monday at 6,580 levels.
More importantly, the Nifty PSU Bank index was see quoting below its 200-DMA (Daily Moving Average) for the second straight day. The PSU Bank index is seen below this long-term moving average after a gap of over 2 years. The index had conquered the 200-DMA on July 18, 2022; thereafter the index went on to touch an all-time high at 8,053 – on June 03, 2024 – up 200 per cent from the breakout point (2,685). At present, the 200-DMA stands at 6,738.
Technically, the 200-DMA is considered as a key indicator in determining the overall long-term trend of the stock or index. Stocks trading above this long-term moving average are considered as bullish; whereas, those below the 200-DMA as bearish.
For a trend confirmation, the stock or the underlying index needs to close below this long-term moving average for at least three or more trading sessions. As such, the next few trading sessions will be crucial for the PSU Bank index.
Can the index stage a rebound or will the slide continue? Here’s what the chart suggests:
Nifty PSU Bank Index
Current Level: 6,580
Downside Risk: 19%
Support: 6,535; 6,380
Resistance: 6,665; 6,738; 6,900; 7,100
On the weekly scale, the index is seen testing support at its 20-WMA (Weekly Moving Average) – again another key moving average that the stock has honoured since July 2022. The 20-WMA support stands at 6,535; below which immediate support for the index is seen at 6,380 levels.
At present levels, the Nifty PSU Bank index has already shed over 18 per cent from its all-time high registered in June 2024.
On the contrary, in case, the Nifty PSU Bank index is able to withstand the current selling pressure and seek support near the immediate levels; the index may stage an interim recovery towards 7,100 levels; with resistance likely around 6,900.
PSU Bank stocks
Meanwhile, a vast majority of the PSU Bank stocks are trading below their respective 200-DMAs, with Union Bank as the key laggard. The stock is down almost 12 when compared with its 200-DMA.
Similarly, Bank of India, Uco Bank and Punjab National Bank are down in the range of 6 – 9 per cent each. On the positive front, index heavyweight and the stock of largest state-run bank – SBI is seen holding above its 200-DMA, with a gap of near 4 per cent.
First Published: Sep 09 2024 | 12:40 PM IST
