Axis Bank has been buzzing on bourses for a while and now stands at an inflection point. If it rises above Rs 680 on a monthly closing basis, it might witness sharp rallies subsequently.
If you read our blogs regularly, you might recall our recent articles on two crucial technical indicators—Relative Strength Index (RSI) and Moving Averages Convergence and Divergence (MACD). The former helps you identify overbought/ oversold stocks and latter highlights the strength of current price trends.
RSI is a leading indicator while MACD is a lagging but strong indicator. However, you can’t derive a meaningful conclusion from them unless the price chart is in agreement with RSI and MACD trends.
Both these indicators reflect the bullishness of investors on Axis Bank.
RSI generated a buy signal on July 31, 2018 when Axis Bank traded at Rs550. MACD confirmed the bullish pattern on August 31, 2018 when the price was Rs 649.
Preparing to break through…
At the current market price of Rs 661 (closing price as on January 23, 2019), the stock is in a strong uptrend but is shying away from the crucial break-out level.
- RSI is trending above the 9-month average line and is still at 62. Recall, RSI can go up to 90 when the stock is in a strong uptrend.
- MACD is also above the 9-month signal line.
- The stock is trading above its 10,30,60 and 200 monthly moving averages. It’s noteworthy that these averages are also trending upwards thereby reflecting the firmness of the uptrend.
- In the recent past, it has taken a strong support of 30-month moving average.
The only missing link now is the monthly close above Rs 680.
Why is a monthly close above Rs 680 so crucial?
As you can see in the chart above, the stock has been forming higher bottoms but hasn’t been able to make higher tops so far. A monthly close above Rs 680 would call an end to a 4-year long consolidation phase of the stock.
It would indicate that investors are convinced about the future of Axis Bank.
Usually, such strong break-outs require strong triggers.
What could be the trigger for Axis Bank?
Investors have given a thumbs up to the recent change in the management.
On January 01, 2019, Amitabh Chaudhry took charge as the MD and CEO of Axis Bank. He will have a term of 3 years. The street would also be keen to know if there’re more changes in the key management positions going forward. Some media reports indicate more high-profile appointments in key positions.
If the new management delivers on the set objectives of the bank, the stock might spike up.
Axis Bank expects the new formation of Net Non-Performing Assets (NPAs) to drop significantly in H2, FY 2018-19. Investors might track the developments on this front closely. Hence, it’s also crucial to see how quarterly results pan out over the next few quarters.
At the onset of FY 2018-19, the Company had outlined a four-pronged strategy to make the Bank’s operations more predictable.
- Normalising credit risk
- Delivering profitable growth by changing the business mix
- Enhancing risk management capabilities and reinvesting the corporate bank
- Investing in three areas—digital analytics and subsidiaries
Tangible success on the aforementioned counts would bode well for the stock.
Axis Bank will announce its quarterly results on January 29, 2019—worth tracking.
Featured Image Credit: Axis Bank Website
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company.
We do not individually or collectively hold 1% or more of the securities of the company.
We do not have any other material conflict of interest in the company.
We do not act as a market maker in securities of the company.
We do not have any directorships or other material relationships with the company.
We do not have any personal interests in the securities of the company.
We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships.
We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.