BoI, PNB, IOB: 5 PSBs form 'falling knife' pattern; charts say stay away

State Bank of India is the only stock that has bucked the trend. The stock has amplified investors' wealth by 250 per cent in the last five years and 550 per cent in the twelve-year period

The Nifty PSU Bank index has tumbled 48 per cent from its peak of 4,639.90, recorded just months after its debut in 2011. The index since its inception has been on a downward ride and largely under-performed the broader market. 

Further, the index had cracked to a record low of 1,078.45 during the May 2020 Covid-19 led meltdown.

The Nifty PSU Bank index consists 12 state-run banks namely - Bank of India (BoI), Indian Overseas Bank, Central Bank of India, Punjab National Bank, UCO Bank, Union Bank of India, Punjab & Sind Bank, Bank of Maharashtra, Bank of Baroda, Canara Bank, Indian Bank, and State Bank of India.

Of these, shares of the first seven PSU banks have tanked more than 90 per cent from their all-time highs, and are exhibiting 'falling knife' structure on the charts. 

Meanwhile, shares of Bank of Maharashtra have plummeted 80 per cent, while Canara Bank, Indian Bank, and Bank of Baroda have tumbled 71 per cent, 62 per cent and 56 per cent, respectively.

State Bank of India is the only stock that has bucked the trend, recording new historic peaks, despite the overall weakness. The stock has amplified investors' wealth by 250 per cent in the last five years and 550 per cent in the twelve-year period.

At the current juncture, here's how these stocks look placed on the technical charts: 

Bank of India (BANKINDIA)

Outlook: Bullish breakout only over Rs 50

The formation of "Lower High, Lower Low" continues to dominate the positive sentiment, shows the weekly chart. The said pattern suggests a bearish sentiment, which remains negative until the stock does not conquer and sustain over Rs 50, its near-term hurdle. On the other side, an aggressive sell-off below the support level of Rs 40 could trigger another downfall in the stock. This could result in a weakness towards Rs 35 and Rs 32. CLICK HERE FOR THE CHART

Indian Overseas Bank (IOB)

Outlook: Bearish pattern of "Head and Shoulder"

On the charts, a pattern is getting evolved and it represents "Head and Shoulder". This bearish formation could see more downside ahead. However, as long as the neckline support of Rs 14 is maintained, one could see sideways movement. A breach below Rs 14, which is its 200-weekly moving average (WMA), might result in a downside to Rs 10 level, shows the weekly chart. CLICK HERE FOR THE CHART

Punjab National Bank (PNB)

Outlook: Death Cross, a bearish pattern

There is a clear formation of "Death Cross" pattern on the monthly chart of the Punjab National Bank. This stock needs to cross Rs 60 to ignite a positive bias. If PNB violates Rs 25, the breakdown mark of "Death Cross", then it would trigger a fresh sell-off. Currently, charts indicate that there is a high risk of taking a long trade at current levels, but if the stock manages to hold the neckline support, then the accumulation and reversal could propel high returns. CLICK HERE FOR THE CHART

UCO Bank (UCOBANK)

Outlook: Needs to surpass 200-WMA 

This counter has been trading under 200-WMA since March 2015, and as a result, the price action has dismantled the positive sentiment. The 200-DMA is presently set at Rs 14.50, and unless the stock does not conquer this mark, it is unwise to think of any optimistic outlook. CLICK HERE FOR THE CHART

Union Bank of India (UNIONBANK)

Outlook: Bigger range of Rs 45 to Rs 30

While the monthly chart showcases some accumulation structure close to Rs 30-mark, the weekly chart indicates resilient obstacle at Rs 44 level.  Thus, either side violation could signify the beginning of the next trend. So far, there are no signals that could confirm a trend, but the overall sentiment lingers around sluggishness. Investors have endured enough pain in investment and the best possible step would be to eye for proper confirmation.  CLICK HERE FOR THE CHART