Is PNB Share Price Breaking Out?

Share price of PNB (Punjab National Bank) has witnessed a remarkable gain of over 10% in the current week so far as it broke out from its resistance zone.

The significant surge in the stock price indicates a potential shift in the market sentiment towards PNB as the banking stocks are witnessing a rally with Bank Nifty trading at an all-time high.

The breakout from the resistance zone suggests that the stock may be poised for an upward trend, attracting the attention of investors and traders alike.

The Technical Breakout

The stock price has experienced a significant breakout on the daily chart. It surpassed its previous swing high of Rs 53.15. This breakout indicates a potential upward trend in the stock.

PNB Daily Price Chart

 

The breakout in the stock price is further supported by a leading indicator, Super Trends, as well as a lagging indicator, MACD (Moving Average Convergence Divergence.

The Super Trend indicator consists of two lines plotted on the price chart: the Super Trend line and the Stop line.

The Super Trend line reflects the direction of the trend. The Stop line acts as a dynamic support or resistance level. The calculation of the Super Trend involves two key parameters: the period and the multiplier.

The period determines the number of bars used to calculate the indicator, while the multiplier adjusts the sensitivity of the indicator to changes in volatility.

In the daily chart above, the price of the stock is currently trading above the support level provided by the Super Trend indicator, which is set at 53.

This indicates the stock price has managed to stay above this key level, suggesting a bullish bias in the market.

Additionally, the presence of green clouds or areas on the chart further reinforces the bullish momentum.

Additionally, the bullish crossover of averages above the zero line on the MACD further supports the bullish momentum in the stock.

The bullish/bearish crossover is an additional indicator traders should consider when assessing the market outlook.

The Risk

However, despite the positive developments, PNB has been underperforming in recent weeks compared to private banks such as HDFC Bank, IndusInd Bank, Axis Bank, and ICICI Bank.

These private banks have been key drivers of the recent market trend, while PNB has struggled to keep up with their performance. This underperformance raises questions about the sustainability of PNB's bullish trend in the short term.

On a broader scale, it is worth noting that the last quarter of 2022 witnessed the PSU (Public Sector Undertaking) Bank index outperforming the private bank index.

This shift in performance suggests a potential comeback for PSU Banks from a long-term perspective.

While this bodes well for PNB and other PSU banks, it is essential to consider the current underperformance of PNB in relation to this overall trend.

In fact, we were the first ones to indicate the commencement of the bull run in PSU Banks in July 2022.

PNB / Nifty PSU Bank Index Weekly Chart

 

One key risk to the bullish trend of PNB lies in the ratio of the PNB/ Nifty PSU Bank Index.

This ratio serves as an indicator of the bullish momentum in PNB and its performance relative to the PSU Bank Index, represented by the Nifty PSU Bank Index.

The analysis of the ratio chart reveals that the bullish momentum in PNB has not been sustained since 2018 since its trendline breakdown. Instead, it tends to fizzle out, leading to underperformance compared to the PSU Bank Index.

Conclusion

While PNB has recently shown a breakout on the daily chart, supported by the bullish super trend indicator and positive MACD crossover, its underperformance in comparison to private banks raises concerns.

The risk lies in the historical pattern observed in the ratio chart of PNB/Nifty PSU Bank Index, where the bullish momentum in PNB tends to fade and underperform the PSU Bank Index.

These factors should be carefully monitored to assess the sustainability of PNB's bullish trend in the future.

There could be a potential short-term momentum play for traders here, but it is important to note that it comes with the risk of volatility. Traders should thoroughly understand this risk before considering any trade.

Today, PNB share price opened at Rs 57.3 against its previous close of Rs 57.

It has a 52-week high of Rs 62 touched on December 2022 and a 52-week low price of Rs 30 touched on 6 July 2022.

If you're interested in being part of my charting journey, join my telegram channel - Fast Profits Daily. You'll get access to the best trading ideas in the stock market.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...