Technical Stock Pick: 20% rally in 3 months! This PSU stock retest consolidation 1-year breakout zone

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State Bank of India (SBI), part of the PSU banking space, has rallied more than 20% in the last 3 months but the stock recently bounced back from 1-year consolidation range breakout levels.

Short-term traders can look to buy the stock for a possible target of Rs 841 in the next 1-2 months, suggest experts.

The stock rose from Rs 578 recorded on 9th November 2023 to Rs 725 as on 9 February 2024 which translates into an upside of over 20% in the last 3 months.

The stock rose more than 9% in a week and over 13% in a month.

The recent momentum helped the stock to break out from a 1-year consolidation which started from December 2022 when the stock touched a higher of Rs 629.

After hitting the higher of Rs 629 the PSU stock underwent consolidation and took support above the 50-week moving average on the weekly charts before bouncing back.The stock gave a breakout from the resistance zone in December 2023 on the weekly charts, but it failed to hold the momentum and slipped towards the support area by January 2024.The momentum helped the stock to break out from a falling trendline resistance on the weekly charts which suggests that bulls are here to stay.

In terms of price action, the stock is trading well above most of the crucial short- and long-term moving averages such as 5,10,30,50,100, and 200-DMA, which is a positive sign for the bulls.

The daily Relative Strength Index (RSI) is at 78.8. RSI above 70 is considered overbought. This implies that the stock may show a pullback. The daily MACD is above its center and signal Line, this is a bullish indicator.

“SBI is currently trading at its all-time highs, demonstrating strong momentum compared to the broader market,” Vidnyan S. Sawant, Head of Research at GEPL Capital Ltd, said.

“The stock is moving in an upward trend and has experienced a notably rapid retracement, retracing the decline of the past six weeks within just two weeks, indicating robust momentum,” he said.

“Support for the stock is evident within the polarity range at 620 level, where resistance levels from December 2022 and July 2023 have now become a support zone in recent weeks, underlining a solid price structure,” highlights Sawant.

A significant breakout in volume, surpassing the 21-week average volume, further emphasizes the strength of SBI current momentum.

Additionally, SBI is trading above key moving averages such as the 12-day and 26-day Exponential Moving Averages (EMA), confirming the prevailing uptrend.

“When comparing SBI’s performance against the Nifty50, the ratio chart suggests continued outperformance. SBI has broken out of a falling trend line on this chart, reinforcing the strength of its uptrend relative to the broader market index,” added Sawant.

“Looking ahead, there is a potential upside for the stock, with a target of 841. It’s advisable to set a stop loss at 670 on a closing basis to manage risks effectively,” he recommends.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

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