SBI - IS THE BOTTOM NEAR?

May 21, 2020 ,



SBI has fallen more than 50% three times in the last 10 years. Will this fall give good opportunity to Investors? Time to dig deep and lets find out.

In order to find a rationale to invest we have analysed SBI in different time frames


KEY OBSERVATIONS-

1. Demand Zone -

  • A demand Zone is an area where buyers dominate over sellers, there is massive buying pressure in this zone.
  • SBI is currently in demand zone which is around 160 to 150 levels. This level was held by SBI  for last 10 years. This level was tested during 2012, 2014 and 2016  respectively.
  • SBI has managed to reach this level and is currently trading at 153.
  • This demand zone can be used to our advantage as -   
    • The risk is minimal
    • High profit potential 
    • Risk reward ratio is more.
Click on Chart to Expand



2. A Fall more than 50% -
  • SBI had fallen more than 55% on four occasions in last 12 years.
  • As noticed here, a fall of more than 55% has been seen as buying opportunity and it could be verified using trend line and demand zone.
  • In 2010, 2014 and 2020, two things were common-  
    • There was more than 55% drop in price
    • All these falls made a base around demand zone, which we are currently in.


3. Bollinger Bands -
  • Bollinger Bands consist of a centerline and 2 price channel (Bands) above and below it.
  • The Center-line is an exponential moving average; the price channels are the standard deviations of the stock being studied. The bands will expand and Contract as the price action of an issue becomes volatile (expansion) or becomes bound into a tight trading pattern ( Contraction)
  • When stock prices touch the upper Bollinger Band, the prices are thought to be Over-Bought; conversely, when they continually touch the lower band, prices are thought to be Over-Sold, triggering a buy signal. 
  • We have analyzed SBI on monthly Chart using Bollinger Bands. 
  • These yellow arrows indicate Over-Bought and Over-Sold levels respectively and their respective bounce when the hit these levels.
  • Currently SBI has ventured into Over-Sold zone as per Bollinger Bands.                                                                                                                      

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4. Positive Divergence -

  • Divergence is when the price of an asset is moving in the opposite direction of a technical Indicator,  such as an oscillator.
  • Divergence warns that the current price trend may be weakening and in some case may lead to the price changing direction.
  • Positive Divergence is a situation where price of a stock is making new lows while RSI is making higher lows in stock price.
  • From this we can conclude that the lower lows in the stock price are loosing their downward momentum and trend reversal may follow soon.
  • We have marked Positive Divergence on 4 occasions using red trend line on daily chart, where we could notice a good price up-move after price divergence
 Click on Chart to Expand




SUMMARY

  • Observing all the above points, we can accumulate SBI in trenches and in price range of 145 to 135.
  • Targets can be set around 185 to 200 for Mid Term.
  • All our views will be negated if SBI breaks 125.
  • At these current levels, risk is minimal and it has high profit potential.




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1 comment:

Thank you.

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