Private banks: Investors should be careful before making deposits

by Mayur Shah

The intermediate correction, which was expected, has started after the Sensex made a high of 3760 on Wednesday and this target will become the target for the major uptrend.

Many stocks have exhibited good strength in the earlier intermediate uptrend and these stocks will be the first contenders for the major uptrend as they are also likely to lead the next bull run.

We have also seen many stocks have gone into a major uptrend in the earlier intermediate rise indicating that we could be in a major uptrend. The current intermediate downtrend could probably end before the Sensex reaches its earlier intermediate bottom of 3096.51.

Thus, a higher intermediate bottom will give investors an excellent opportunity to get into the strong stocks.

Investors must now keep a watch at the sectors, which exhibit a higher relative strength. These stocks and the sectors will be the first one to move higher in the next bull run and will take a lead in the next major uptrend. Many mid-cap stocks have exhibited a higher relative strength in the earlier intermediate uptrend and the trading volumes in these stocks were quite good.

These stocks must be also watched in the current intermediate downtrend. Since the past few weeks I have been looking only at strong sectors and stocks which are likely to take a lead in the next bull run.
Go through these sectors and pick up the strongest stocks within these sectors.

Today I will take a look at the private banking sector. A few stocks in this sector look good and a few must be watched in the current intermediate downtrend.

HDFC Bank

HDFC Bank has been oscillating in the marrow range about its 30 weekly moving average (WMA) and has been staying above its strong support of 210/215. The major trend of the stock is down but as it is moving in a narrow range in the past few weeks. This means that the major trend is sideways and if the stock breaks out below this strong support zone of 210/215, the major trend will be certainly down.
However, if the stock continues to stay above this support in the current intermediate downtrend of the market and then moves above 250, the major trend of the stock will turn up and investors can look out for long positions.

Thus, investors will have to track the stock and take a decision accordingly.

They must, however, not enter the stock in the current sideways mode as they will get trapped in the current small move, which the stock has been exhibiting.

ICICI Bank

ICICI Bank is in a major downtrend as the stock has dropped below its 30 WMA and its earlier intermediate downtrend. The stock is in an intermediate downtrend and will exhibit lower levels in the current intermediate downtrend.

However, if it exhibits a lower percentage decline as compared to the Sensex, then investors may look out for long positions in the next intermediate rise.

On the other hand, if the relative strength continues to remain weak, investors must stay away from the stock. Currently, the relative strength line for the stock is bearish as it has dropped below its zero line.

IDBI Bank

IDBI Bank has recently gone into a major uptrend as the stock closed above its earlier intermediate bottom and has completed a double bottom formation. This indicates that the major trend of the stock is up.

The relative strength line has moved above its zero line suggesting that the stock is outperforming the Sensex and any pull back in the stock towards the 30 WMA must be used by investors to get into it.
The recent rise by the stock was accompanied by a sharp rise in volume, which is a bullish sign. Investors who are holding long positions must continue to do so. The next strong resistance to the stock is between 30/32.

UTI Bank

UTI Bank has exhibited a smart upward rise in the earlier intermediate uptrend and is currently facing a strong resistance at the 30 WMA.

The stock could be in a major uptrend and this will be confirmed once it exhibits a higher intermediate bottom in the next intermediate downtrend.

This will give investors a good opportunity to enter into the stock. Thus, investors must keep a close watch at the stock in the intermediate downtrend. The relative strength line has moved above its zero line, which indicates that the stock has been outperforming the Sensex.

Jammu & Kashmir Bank

Jammu & Kashmir Bank is also one of the few banks in the private banking sector which is in a major uptrend and has recently exhibited a 52-week new high and has been exhibiting a very bullish relative strength.

Any intermediate correction in the stock can be used by investors to get into the stock, but
investors must remember that the trading volumes are low and large positions should not taken up.
Any pull back towards the 30 WMA can be used by investors to get into the stock.

The other stocks in this sector are all in a major downtrend and have been exhibiting a bearish relative strength.Investors must look out for long positions from the leaders and must avoid the lagers.