Punjab National Bank: Elliott Wave Counts, Channelized Move, Time Cycle, Fibonacci Retracements.

Banking stocks has always been in demand especially from past 1 week which has pushed the Banking index till 11947 from 10664 in five trading days. We have covered one of the Banks which fall in this index which is PNB.

Punjab National Bank is moving in a down ward sloping channel from past 3 years which clearly suggests that the trend is negative as it is continuously moving below its previous pivot lows as seen the below daily chart. We can also see that prices have arrived near the resistance of the channel which is not a healthy sign for this banking stock.

We have used time cycle of 18 days to understand the possible reversal of this stock which comes on 21st of March 2014. The important observation in time cycle is after every 18 days it makes two bottoms followed by two tops. The 2 bottoms before the making of the top were 24th February 2014 and 29th January 2014.

We have also used Elliott Wave analysis to find out the termination of the current wave on the upside. For this to explain we need to go back and start from August 2013. From August 2013, prices were moving in a double correction (a-b-c-x-a-b-c) and completed wave X of one higher degree. Currently it is moving in wave A in which it has completed wave a and wave b and currently it is moving up in wave c. The overall formation from April 2013 till March 2014 is a double correction of one higher degree. Where wave A was completed in April 2013 then we had wave B in May 2013 followed by wave C in September 2013. Recently we had wave X in January 2014 and currently we are moving in wave A which is a second correction.

It is also important to find out the resistance of this stock as it will give the rough idea for traders to trade. Currently prices have arrived at 80% retracement of the previous down move (654-509) which clearly states that the up move which is wave c is in flat pattern. As there is no reversal in this stock we cannot jump to the conclusion that it will fall from here. It can move up till 640 levels which seems to be a very good resistance level for this stock.

In short, the trend for PNB is negative any reversal can be utilized as a selling opportunity which can drag prices lower till 580 levels over short term.


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