- [Instructor] So this week
Bank Nifty has done really well,
and in this positional trading video,
I'll be showing you my
take on the banking sector
and which stocks I am positioning myself
from a long perspective and
in case the opportunity arises
which stocks I am focusing upon
from short sell perspective.
So, let's first begin
with very simple things.
So, I have Nifty Bank chart
here, daily timeframe,
a simple 200 Day Moving
Average and volumes over it.
So, the first thing that I see is that,
price is still below the
200 Day Moving Average,
all of you are not seeing downtrend
as such on a daily timeframe chart.
For downtrend to start,
Bank Nifty would need to slip below 21,000
and more importantly,
below this pivot level here
that is 19,800, 19,700.
So till that point of time,
odds are actually high
that price will gravitate towards
the 200 Day Moving Average
or if consolidation
sideways movement continues,
then eventually the 200 Day Moving Average
will meet price somewhere
near 23,000, 23,500.
So this is an overview of
overall Bank Nifty index.
Now when it comes to respective stocks
I again like to begin
on daily timeframe chart
this is Kotak Mahindra Bank
price is relatively very near
to the 200 Day Moving Average,
so I'm recording this on 25th August
and currently Bank Nifty is doing well
so, it is possible that by the
time this video is released
price will move very close to
the 200 Day Moving Average.
So, similar observation can
be made about Kotak Bank also
price is consolidating
sideways in a broad range,
but as such there is no
downtrend that is visible.
And before we move forward,
let me tell you that
200 Day Moving Average
is one of the most important data points
for me on a daily timeframe chart
when it comes to positional trading.
And whenever major stocks
from sectors like banking,
infrastructure, finance,
they start approaching the
200 Day Moving Average,
they become really good place
from eight to nine month perspective
in terms of positional trading
that is both on the long
side and on the short side.
Now when it comes to HDFC
Bank in the banking space,
I'm considering only large cap stocks
because that is what I like
to trade in positional trading
HDFC Bank has already moved
above the 200 Day Moving Average,
so overall for Bank Nifty
also this is a positive sign.
And currently for long trades,
I am considering only those stocks
that are very near to
200 Day Moving Average,
along with some data points
with respect to fundamental analysis
that I will put up towards
the later end of the video.
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- [Instructor] So this is the chart of SBI
on a daily timeframe chart,
price is much below the 200
Day Moving Average here,
in HDFC it has already crossed
in Kotak it is relatively very near
to 200 Day Moving Average,
and when you come to ICICI Bank,
prices again below the 200
Day Moving Average decisively
though in ICICI Bank price is
clearly forming a structure
of higher lows, so this
is some bit of positive
but when you compare
it with Kotak and HDFC
those seem to be really strong
with respect to price being
near the 200 Day Moving Average.
So let us now look at Kotak Bank,
so this is on a weekly timeframe chart
and price is facing resistance
at 1440, 1450 level,
no price is trying to move higher.
It has faced three times rejection
at this precise level of 1440, 1450.
If you take a look at, again
this is weekly timeframe chart
for Kotak Mahindra Bank,
it is forming some sort
of ascending triangle.
Again these are very basic
technical analysis patterns
that work really well.
And as you increase your timeframe
that is move higher from daily
to weekly, weekly to monthly
the accuracy of these patterns
actually increase quite a bit.
So, in quarter if you see
it is facing resistance
right at the level of 1440, 1450
which is also the 200
Day Moving Average level,
and the upper end of this
ascending triangle here.
So, there is some sort of confidence
that is visible in Kotak Mahindra Bank.
Now, when it comes to ICICI Bank,
again a very similar structure,
it has faced rejection multiple
times between 380 and 400.
Now, if you take a look
in general price is stuck
in a broad range of 280 to 380,
so this is about 100 rupees
range which is quite wide,
but the thing that you have to see is that
after the markets bottomed
out in March, April,
price has been trading very close
to the upper range of 380, 400.
So, odds are high that price
will eventually break out
and ICICI Bank will start trending higher.
So, for those of you
who are channel members,
please note that another new part
of VSA series has been released,
so essentially there are two playlist.
In the first playlist,
I have explained the
entire framework of VSA
and in the second playlist,
I do explain about
market structure sectors
and stocks to focus upon.
If you look at HDFC Bank,
this seems to be the strongest
bank in the banking sector.
Again, this is weekly timeframe chart,
and even ICICI chart here
was on weekly timeframe.
And in HDFC Bank you can clearly see
a structure of higher high and higher low
on a weekly timeframe chart,
prices clearly trying to move higher.
When it comes to SBI on
a weekly timeframe chart,
so these are a couple
of high momentum candles
that were visible on the downside.
Now on the upside when
the stock bottomed out
I can see just one bullish candle here
that is on back of high momentum,
after that the range of the candle
has been relatively narrow.
Now SBI should be on a watch list
and I'll state the reasons
towards the end of the video
because recently it has
started performing well
and it also offers some
sort of diversification
because this is PSU sector bank.
It is trying to move higher,
let's see how it pans out.
So when it comes to key
technical data points,
I think HDFC Bank and Kotak
based on long term structure
look the best.
You can also consider ICICI Bank.
Now State Bank of India is
moving over the short term,
so, in case I get short term opportunities
swindling opportunities,
then I will look into SBI.
Otherwise, my main focus will
be HDFC Bank, Kotak and ICICI.
Now, when it comes to
short selling preference,
because Bank Nifty is getting close
to 200 Day Moving Average
and from there either the
price can go up or down,
because that is how 200 Day
Moving Average functions,
so, SBI would be my top
pick along with Axis Bank
in terms of short selling,
main reason being that
long term structure of SBA
is still not that positive
like we saw, even in Axis Bank,
if you see long term structure
is still the weakest.
Now I have also
shortlisted Kotak Bank here
that you will only understand
when I'll cover some
fundamental data points.
So let me now come to key data
points that I'm looking at
when it comes to banking stocks.
And again here I'm just comparing
large cap banking stocks
because in positional trading
your position size as
such is on a higher side
that is position size is large,
so you cannot be taking
large bets in small cap
and mid cap banks, at
least that is my approach
when it comes to positional trading.
Now again, in this section, I'm
using very basic data points
that are available for free,
you can Google about these,
these are also available on
websites like screener.in.
So when it comes to comparing
large cap banking stocks,
there are just three
parameters I like to look at.
Number one, net profit margin,
number two, operating profit margin,
and number three return on equity.
I don't like to look
at net interest income,
I don't like to look at gross NPA,
those are some sort of things
that you should only look at
when you want to invest for the long term.
But when it comes to positional trading,
I'm just looking for
these three factors here,
and if you look at the data
in terms of net profit margin,
operating profit margin
and return on equity,
the two best banks that
come out are HDFC Bank
and Kotak Bank.
And in case you wanna
include one more name,
then I would prefer
something like ICICI Bank
just based on the data given here.
Now this data is the price
performance over 13 weeks,
26 weeks and 52 weeks.
I just use this data to
assess the overall momentum.
So if you look at Axis Bank
over the last 26 weeks, it is down 39%,
over 52 weeks it is down 33%,
and over the last 13 weeks it is up 24%.
So, based on this data
in the very short term
that is over a period of 13 weeks,
it is State Bank of India
that is performing the best it is up 35%
followed by HDFC Bank,
ICICI Bank and Axis Bank.
But when it comes to
combination of 26 weeks
and the last 52 weeks
because these two timeframes
represent roughly six months
and 12 months of trading activity,
it is HDFC Bank and Kotak
Bank that performed the best.
So HDFC Bank over the
last 26 weeks is down 9%
over the last 52 weeks it is up 1%
and Kotak Bank is down
minus 17% and down minus 6%
when it comes to over the last 52 weeks.
Again based on this data,
the three top banks that
qualify are HDFC Bank,
Kotak Bank and ICICI Bank.
And see tracking these sort
of data points is important
because this is market's
way of telling you
which stocks are the strongest
and generally whichever
stocks are the strongest
tend to get more stronger.
So that is why tracking
performance over 13 week 26 week
and 52 week is a crucial data point
that every positional trader
should at least look into
when he's deciding to shortlist stocks.
Now key data point that I like to track
after the market bottomed out
what percentage of volume increase came in
as the stock started moving higher,
that is what I'm measuring
here in terms of volume growth.
So as markets bottomed out in March,
and the price started rising
in all the banking stocks,
so HDFC Bank saw 51%
rise in average volumes
followed by Kotak Bank
which saw about 49% rise,
followed by ICICI Bank which
sought 38% rise in volumes.
Now volume just tells you the commitment
of overall traders and investors
and therefore when a stock sees
substantial rise in volume,
it represents interest in that stock,
and that is something I like
to track in high beta sectors,
high beta stocks,
that is which stocks are
attracting the highest volume
in terms of percentage growth.
Three stocks that qualify are HDFC Bank,
Kotak Bank and ICICI Bank.
So, in this particular section,
I am tracking the overall analyst rating
for all the large cap stocks.
So, I have compiled the
cumulative ratings here.
So, in the current times if
you see only four analysts
have recommended buying
into the banking sector,
about 12 have recommended to
hold banking sector stocks.
Again, these are only large
cap banking sector stocks,
and about 14 analysts
have given a sell rating.
If you compare this one
year back about 15 analysts
were recommending buying
into the banking sector,
about six were recommending holding on
to the current large cap
stocks in the banking sector,
and about nine analysts were
recommending a sell rating
with respect to large cap banking stocks.
So, in the current scenario,
if you see the bias is actually
against the banking sector
where not many analysts
are actually recommending
to buy the sector as such.
And this is when I like to focus on stocks
and sectors in general,
when majority of analysts,
majority of participants
are not focusing on a sector on a stock,
that is when I like to start tracking
in terms of positional trading,
because that is where risk and
reward is on the higher side.
And I think from next eight
to nine months perspective,
good trending moves will be
visible in the banking sector.
So one key data point
that I like tracking in the banking sector
is the loan book growth over the years.
So I've compiled data from
March 2017 to June 2020.
Now back in March 2017,
it was HDFC Bank that
was growing the fastest
that is in terms of loan book
in March 2018, it was Kotak Bank,
again in March 2019, it was HDFC Bank,
in March 2020 it was again HDFC Bank,
and as of June 2020,
it is again HDFC Bank.
The one thing that I
don't like in Kotak Bank
and I've also selected Kotak
Bank as a short candidate
in case Bank Nifty starts moving lower,
is over the last three years,
there's been continuous
decline in growth in loan book
when it comes to Kotak Bank.
Now in March 2019, it was 20%,
in March 2020, it was 5%
and latest, it is minus 5%.
So this is something I
don't like to see in a stock
and because the overall structure
of Kotak Bank is still good,
so, I have kept it in
long preference also,
but because of this loan book data,
I'm also keeping it in short sell list.
So, this is how I like to track.
The second or third best bank
if you see it is ICICI Bank,
ICICI Bank is also growing
really well and so is Axis Bank.
But when I compare the
technical data points
of ICICI Bank with Axis Bank,
so ICICI Bank clearly
has an edge over there.
So there are a couple of
ways I preferred trading
once I've shortlisted some stocks.
Now the first approach
is the systematic investment approach.
I have done two videos
on this SIP in stocks,
please search those videos
because I have shared
how you can systematically invest
based on even something
like positional trading.
So in this scenario,
my top picks for my portfolio
would be HDFC, Kotak
and ICICI Bank.
I will select SBI just from a
diversification point of view
in near term strength is relatively good
but over 52 weeks and 26
weeks still SBI is lagging.
So the way I do systematic
investment is that
I just use simple 200 Day
Moving Average as a filter.
As far as price remains above
the 200 Day Moving Average,
I keep investing or keep
trading systematically
that is how I keep adding positions.
So initial position is a bit big
and then you add small
chunks to that position
and that is how you systematically invest.
The second way one can trade
is by simply trading breakouts
and pullbacks on a daily timeframe chart
60 minute time frame chart.
I have covered this in many
price action trading videos
link to all those videos
will be coming up in this section here
so do check out the same.
So when it comes to
someone like retail trader
who has a full time job cannot commit
that much time in tracking
charts continuously,
I think a systematic
approach is much better,
because as trends mature,
you can even convert
these positional trades
into long term investment that
is something you need to do
in terms of overall risk profile.
But systematic investments
is one of the techniques
that you should explore further
based on your overall risk profile.
So there are two key things
that you have to note.
Number one, wait for banking sector
to decisively move above
the 200 Day Moving Average
usually the stocks that cross
200 Day Moving Average force
are ones that become rank out performers
and I think HDFC Bank
and kotak Bank currently
are positioned well.
The second point that you
need to note is overall,
what Nifty does in terms
of 200 Day Moving Average.
So if Nifty starts slipping
below 200 Day Moving Average
then usually I stop my
systematic investments
because price can drop lower
and I can then get better average price.
So that is how I like to position
based on my own risk profile,
my own risk preference,
you need to see what
strategy suits you best.
So do let me know any questions
that you have in the
comment section below.
Kindly consider hitting the like button
and sharing this video if
you find the content useful.
Thanks a lot for watching,
take care and be safe.
