PSU Bank signals a breakout: A promising reversal trading opportunity emerges

In the culmination of the trading week, markets experienced a robust upward surge, with IT giants driving the momentum right from the opening bell. The benchmark index, Nifty 50, opened with a gap-up and sustained its upward trajectory, closing near the day’s high at the 21,894 level. This marked a breakout of the bullish up flag pattern, a continuation pattern that unfolded over the past 11 days.

PSU Bank in the Spotlight

Amidst this positive momentum, all sectors actively participated in the rally. Notably, Nifty PSU Bank, an index that stole the spotlight, exhibited an impressive surge of 2.75% or 156.95 points in a single trading session, ranking as the second-best performer among all sectoral indices. Delving into the specifics of Nifty PSU Bank, a closer look at its weekly charts reveals a compelling long-term trend reversal breakout pattern that emerged over the past year.

Currently, traversing an impulse structure with higher highs and higher lows within an upward channel, the index retraced the last up move-in for four trading sessions of the current week after establishing a new lifetime high. However, the strong pullback observed in today’s trading session nullified all losses on the index front, enhancing its appeal for long traders.

Today’s trading action also breached the Super Trend (ATR 10 Multiplier 1) and closed above it, indicating robust momentum. The highest level of the upward trading channel for the next few sessions is around the 5,970 level, and any closing above this level would signify a breakout, potentially leading to a fresh and steep rally.

Future outlook

Looking ahead, the outlook for Nifty PSU Banks paints an alluring picture, with a minimum target of approximately 7% for the index after the breakout. This makes it an appealing prospect for both momentum breakout traders and swing investors.

In light of these compelling developments, PSU banking stocks hold significant promise for astute investors. With an impressive track record in the banking industry, the sector stands as a noteworthy player to monitor as market dynamics continue to evolve incessantly.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions