PSU banks hold the markets, Index witnesses breakout

Indian benchmark indices opened on a negative note, hit day’s low, but bounced back in the afternoon session. The markets are marginally down, but trailing near to where they opened. All thanks to Pharma, followed by PSU Banks which have refrained the markets from falling further. Nifty PSU Bank has gained 1 per cent plus with all the stocks in the positive territory.

Barring SBIN and Bank of Baroda which hold the highest weightage of 69 per cent and 9 per cent, respectively in the Nifty PSU Bank index, all other stocks gained more than 1 per cent each. Andhra Bank gained the most at 5.3 per cent while PNB and Allahabad Bank gained 4 per cent plus at 14:36 hours.

PSU Bank index had witnessed a multiple point downward sloping trendline breakout at 2,945 on May 25 followed by a pullback of just below the trendline level. The index posted a Doji and bounced back from 50 per cent retracement of the prior upward rally from 2,645 to 3,055. Thereafter, it has given three consecutive daily upbeats till date. Volumes are rising and 14-period RSI is nearing 60 which suggests momentum.

Going forward, in case the upside rally persists, we hold 3,055-3,105 as the resistance levels. The index also depicts a kind of Pennant pattern with a breakout at 2,955 levels which suggests a long upswing in near term. However, the index is still lying below its major EMA levels of 100 and 200, and hence if it retreats from here, we hold 2,955-2,920 followed by 2,860 as support levels.