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Medium term technical forecasting on CNX PSU Banking Index

Nagaraj Shetti


PNB. IDBI & KTK Bank CNX PSU Banking Index: CNX PSU Banking Index weekly timeframe CNX PSU Banking Index monthly timeframe RETAIL RESEARCH P age |2 . Union Bank. RETAIL RESEARCH Sector CMP Trend Support Resistance Trading Strategy Components expected to perform in line CNX PSU Banking Index 3114 Weak 3030 3210 Sell cmp/on rise SBIN. ALBK.

• Monthly timeframe: The CNX PSU Banking index as per larger timeframe like monthly has been in a sharp up trended move over the last 8-9 months. • Normally. Here. • Weekly 8 period momentum oscillator like MACD is placed around its oversold region and is now making attempt to show negative crossover signal (MACD line cutting below its signal line). the bottom has not yet been confirmed. • Previously. • Monthly momentum oscillator like 14 month RSI seems to have failed to reach the key upper levels of 60 and is now turning down from around 52-53 levels. • Normally. Such expected pattern of monthly RSI could mean. triggering of sharp weakness in the PSU Banking index ahead. • Hence. the bearish engulfing is a top reversal pattern and this action is suggesting a near term top reversal in the CNX PSU Banking index as per weekly timeframe. few such doji patterns (marked in X) have resulted in an intermediate top reversal pattern in the CNX PSU Banking index in past (marked in X). But. without showing any reasonable corrections in between and currently showing high volatility at the higher levels. But the formation of lower top needs to be confirmed by the way of reasonable weakness from here. the index has slipped into decline in the last couple of weeks and the underlying uptrend of the last 8-10 months has not damaged yet. At the lower levels we observe a formation of larger double bottom during Feb-16 around 1905 levels (orange horizontal line). a formation of such doji pattern after a reasonable upmoves could be considered as an impending warning signal for a top reversal and the weakness begins from the highs. We observe consistent lower highs in monthly RSI over the last few years and have seen that monthly RSI has eventually slipped below 40 levels. • Presently over the last three months. the index has been forming reversal patterns like advance block and last month has witnessed an unusual long legged doji pattern (unusual long upper and lower shadows with identical closing). the weakness seems to have started to begin. On the confirmation of negative crossover. RETAIL RESEARCH Observation: • Weekly Timeframe: The CNX PSU Banking index as per weekly timeframe chart has been showing a fine uptrend as per the positive sequence of higher tops and bottoms. We need more evidence by the way of further weakness to confirm the important top reversal pattern in the index. • We observe consistent formation of lower tops as per larger degree and present upmove could be in line with the formation of yet another lower top (around 3503-Nov 16). • The negative candlestick pattern of ‘bearish engulfing’ has been formed during last week and this week saw a formation of doji type candlestick pattern (long upper and lower shadows with identical closing). this is going to be a crucial indication for this PSU banking index for coming months. has all the possibility of declining down to 40 or lower in coming months. • Having not able to sustain the recent upside bounce back. the indicator could signal weakening of upside momentum or gradual strengthening of downside momentum. we may conclude here that the monthly RSI from the current reading of 52 levels. Hence. in a gradual manner. • The positive sequence of higher tops and bottoms is still intact and presently the index has placed above the support (40 week EMA-equal to 200day EMA) and the present weakness so far have halted around the higher bottom process. RETAIL RESEARCH P age |3 .

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We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report. All such information and opinions are subject to change without notice. the formation pattern and overall chart indications as per larger timeframe is showing a red flag signal for bulls for the formation of a medium term top reversal pattern. reproducing or for distribution to or use by. including but not restricted to.” Disclosure: I. Research analyst has not served as an officer. printing. is made as to its accuracy. opinions. • On the confirmation of such top reversal. employees may have various positions in any of the stocks. Accordingly. Research Analyst or his/her relative or HDFC Securities Ltd does not have any financial interest in the subject company. downloading. securities and financial instruments dealt in the report. Also Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. 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Compensation of our Research Analysts is not based on any specific merchant banking. This report has been prepared by the Retail Research team of HDFC Securities Ltd. a sharp decline could ensue in CNX PSU Banking index and that could take index down to 2500 levels (61. • Further decline below the immediate support of 3000 levels could trigger a downside momentum in the index and a move below the low the key support of 2850 levels could confirm a formation of important top reversal pattern. availability or use would be contrary to law or regulation or what would subject HDFC Securities Ltd or its affiliates to any registration or licensing requirement within such jurisdiction. any company mentioned in this mail and/or its attachments. HDFC Securities Ltd may from time to time solicit from. 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RETAIL RESEARCH Summing Up-Forecasting for coming months: • The underlying trend of CNX PSU Banking index is still positive and there is no damage to its intermediate up trend yet. the same may be ignored and brought to the attention of the sender. hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. express or implied. or the income derived from them. completeness or correctness. We also certify that no part of our compensation was. corporate finance. director or employee of the subject company. and should not be construed as an offer or solicitation of an offer. distributed or published for any purposes without prior written approval of HDFC Securities Ltd. Office Floor 8. 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