Karnataka Bank

Investors with medium-term perspective can consider selling the stock of Karnataka Bank (Rs 117.5).

The stock has been on a longer term downtrend since its January 2008 peak of Rs 286. After encountering long-term resistance at Rs 170 which also coincides with 50 per cent retracement of the prior down move, the stock resumed the longer term trend in October 2009. The significant support at Rs 125 that was consistently cushioning the stock in declines since last August was penetrated recently. The stock lost Rs 13 or 10 per cent as it fell through this significant support. It has also conclusively penetrated the 21, 50 and 200-day moving average compression at around Rs 130 and is trading well below these averages.

The daily relative strength index (RSI) is featuring in the bearish zone and weekly RSI is heading towards this zone in the neutral region. After signalling a sell, the daily moving average and convergence and divergence indicator reversed and entered negative territory. The weekly MACD is on the verge of entering into this zone. The volumes too have been dropping since its October peak, backing the downtrend.

We believe that Karnataka Bank can trend down further until it hits our medium-term price target of Rs 91, with a small pause at around Rs 104. Investors with medium-term perspective can consider selling the stock while maintaining Rs 129 as stop-loss. Short-term traders can avoid trading in this stock.

Follow up - Oriental Bank of Commerce (Rs 261.4)

The stock declined Rs 5 or 1.9 per cent from our recommended price level last week. The stock is however trading well above our medium-term and short-term stop-loss. We retain the medium term target and stop-loss indicated for this stock last week though short-term traders can stay away from this counter.

via BL