Karnataka Bank registers impressive technical breakout; surges over 13% in a month

In the midweek trading session, the Nifty index opened on a positive note and quickly climbed to a new all-time high. It made a new lifetime high on a closing basis, boasting gains of more than 150 points. Notably, the Nifty Bank index also reached a new lifetime high, and amidst this strong bullish trend, one midcap bank has captured the attention of investors with a significant technical breakout after a consolidation period of over 180 months. This bank has surged over 13% in the current month, surpassing the total volume of the previous month. 

The stock in focus is Karnataka Bank Ltd, a banking company that provides a range of banking and financial services including loans, savings accounts, term deposits, debit and credit cards, insurance, and online, mobile, and internet banking. The firm operates through various segments, including Treasury Operations, Corporate & Wholesale Banking, Retail Banking, and Other Banking Operations. Established on February 18, 1924, the company is headquartered in Mangalore, India. 

Since reaching its high before the financial crisis in February 2008, the stock has been consolidating within a broad range of Rs 194.60 on the higher side and Rs 34.20 on the lower side. Interestingly, the lower end of this consolidation range aligns with a retracement support level of over 78.6% from the last multibagger rally on the monthly chart. In the current month, the stock has witnessed strong buying interest, leading to an upward movement from the support of the 5MMA (5-month moving average). 

By drawing a trendline from the high of February 2008 (Rs 194.60) to June 2017 (Rs 164.55), we can identify a breakout trendline of a continuation pattern known as the Bullish Up Flag Pattern. Intriguingly, the stock has recently breached this trendline and closed above it on the monthly chart, indicating a breakout of the mentioned pattern. This trading action suggests that the stock could rise up to Rs 215, representing a gain of over 25% from the current month’s closing level. 

Swing traders and short-term investors may want to consider adding this stock to their watchlist.