Last Updated on Mar 2, 2022 by Aradhana Gotur
This article is authored by Kunal Rambhia, a fund manager at The Streets, a private fund. He has been in the equity market since 2010, performing various roles such as Associate Research Analyst, Research Analyst, and Associate Portfolio Manager. He has media appearances with CNBC and ET NOW. Kunal is also a visiting faculty in multiple colleges.
After a sizable correction in equities, I prefer looking at those quality counters, which are available near support level. Herein I share my view on Kotak Bank.
Weekly chart with simple Trendline
Weekly chart from 2009 till now is on screen. We can see that the stock respected this trendline (in terms of zone) 12 times in the last 13 yrs. Major declines also respected the same trendline. Even the fall of 2020 held onto the same support zone. In recent times, price underwent sideways consolidation, making it available near to the same trendline, making it worth shortlisting for good buying opportunity from a positional perspective.
This is also a weekly chart with zoomed data. Though there has been sideways consolidation since Nov 2020, the counter is holding up its up-trend, which emerged since the bottom of 2020. The recent price correction exactly halted at the inflection point, highlighted with a white circle, with good volumes. There is a possibility of the trend remaining intact if the follow-up buying emerges from the present zone. As it is near to the mid-term support level, it’s offering the best risk-reward for longs.
Weekly chart with Exponential moving average
Since 2009, it is clearly seen that 100 EMA is offering good support to the counter. There were whipsaws during a couple of months of 2020, but 100 EMA has proved its reliability in the last 13 yrs, which is clearly visible on the chart. This screams out the same opinion as the trendline. The beauty of technical analysis. ☺
Weekly chart with Kumo Cloud of Ichimoku
In recent years, it is clearly seen multiple times that price has taken support of Kumo cloud. Price is continually taking support of the cloud for 6-7 mth and holding up well. This doesn’t mean that a rally can emerge from here, but it certainly highlights the support area on the chart.
Daily chart with Simple trendlines
Broader sideways consolidation since November 2021 so far seems like a broader curve formation (highlighted using white trendline). The last phase of consolidation seems like a symmetrical triangle (highlighted using yellow trendlines). Need to keep an eye on ‘potential breakout’.
Daily chart with MACD
Coming to lower timeframe charts, MACD is showing possible positive divergence on the chart, where price made almost similar bottoms and MACD made a higher bottom. Also, there has been crossover on MACD since a couple of sessions. Though MACD is below zero line, positivity is building up. One should remember that MACD is a lagging indicator and so confirmation of trend comes on its emergence.
Daily chart with RSI
A similar bullish divergence is seen on the daily chart with RSI. Alongside, we can see RSI above 50, with a positive crossover of its moving average. Both observations confirm the possibility of an emergence of a bullish trend.
Ratio chart of Kotak with Bank Nifty
Weekly ratio chart of Kotak bank with Bank Nifty shows a possibility of double bottom formation with bullish RSI divergence. This concludes that there is a possibility of Kotak Bank outperforming Bank Nifty.
Putting it together
Looking at weekly charts with trendlines, 100 Exponential moving average and Ichimoku Cloud, it seems that the counter is offering the best risk-reward ratio for long positions. Looking at daily chart trendlines, formations, RSI and MACD, it seems there is a possibility of breakout anytime soon. So it is logical to shortlist counters and keep watch on the stock for possible bullish trade with the nearest stop and positional targets.
Statutory disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that my personal position, my fund’s position, my client’s position and my relative’s position may be open at the counter. Prefer to take the advice of your financial advisor before initiating any position.