SBI was the Leadership stock before Nov 2010/Inflation-Corruption Noise
As you can see in the weekly chart above: SBI made a high of 2500 in 2007. Then during Lehman crisis, SBI stock saw a brutal correction and it fell from 2500 to 1000. But then when Global markets made a comeback on Ben Bernanke’s green shoot remark/QE program – SBI rallied and from 1000 levels – it rallied to 3500 in a pretty vertical fashion. In the process – SBI broke past 2500 and that level became the support for the stock
Inflation Attack on the SBI stock
SBI stock bore the brunt of the stock market correction post Nov 2010.
As you can see in the weekly chart above: SBI stock not only broke down below 2500 – but also established it as well defined resistance. Also, in last few years: SBI stock seems to have found support near 1500-1600. Now what’s disturbing: at a time when Nifty is trading at higher end of the resistance – SBI is trading at lower end of the range. It just reflects how weak the stock is technically. Even in a good market – traders/investors are avoiding the stock.
Is SBI a Buy at CMP of 1500-1600?
Technically – The Answer is No. But if one is a big SBI believer, one can Buy with an assumption that stock will hold 1500 and eventually rally to 2500 in CY 2014. That itself will be a 50% move. BUT Here’s the problem: there is no guarantee that such move may happen considering how weak the stock is technically. Also if overall market starts correcting, then SBI will be the first stock to break down. Hence, one should be prepared to exit if stock breaks down and makes new low below 1450.
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