Stock Study of the Week - SBI - 14Jun2009

On weekends I spend sometime studying charts of the reputable companies - those that make up Sensex or Nify or BSE200 - either to detect near term price pattern or to seek dips and pullbacks.

This week I looked at the chart of SBI - certainly a reputable company!


As you can see, the last Friday closing price 1634 is below 1660 which is the 20 EMA ( Low). It seems that we can expect the stock to move down further in the next few weeks. Now this down turn will be arrested or over if if the stock were to close above its 20 EMA ( High) which is 1754 at this time.

In other words, aggressive traders can short SBI with a SL at 1754.

What about an investor who is waiting for a chance to buy SBI at lower price? S/he can also make use of this analysis and wait for a lower price to be reached. What target price should we look for in such a case?

Lets look at the chart again. The 50 day EMA ( Low) is located now at 1475. So we can reasonably set a target of 1475.

In other words, a trader can short SBI now with SL at 1754 and a target of 1475. And an investor wanting to accumulate SBI at a more reasonable valuation can plan to - not hope to - pick up SBI around 1475/1500 which is a good 135 points below the current price.

Does this analysis make sense to you?

If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com

Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.