Aug 21, 2023
HDFC Bank is the largest private-sector bank in India.
Known for its comprehensive range of banking and financial services, it has earned a reputation for its customer-centric approach, innovative solutions, and robust technological advancements.
Over the years, HDFC Bank has consistently demonstrated its commitment to excellence, setting high standards within the banking industry and playing a pivotal role in shaping the financial landscape of India.
Let’s look at the bearish sentiment surrounding HDFC Bank’s stock price on charts.
Technical View
According to daily charts, the stock has encountered persistent resistance multiple times around the Rs 1,700 level.
HDFC Bank, Daily Chart
The resistance at Rs 1,700 indicates a strong barrier that the stock has struggled to surpass, pointing to the possibility of a bearish reversal.
In early July 2023, the stock reached a high of Rs 1,757 ahead of the merger with HDFC Ltd but failed to head higher.
According to the Wyckoff theory, the high of Rs 1,757 marks a fakeout phase. A fakeout occurs when a price breaks out of a significant level but fails to sustain that momentum, subsequently reversing its direction.
The peak of Rs 1,757, in this context, could represent a false breakout that could potentially signal the top of the stock’s bullish run.
The Breakdown of Long-Term Average
An important indicator of the stock’s trend is the 200-Day Exponential Moving Average (200DEMA) which is termed a long-term moving average.
Recently, HDFC Bank’s stock has convincingly traded below its 200DEMA. This technical development is often interpreted as a strong bearish signal, indicating a potential shift in the stock’s trend direction.
The consistent trading below this moving average suggests a loss of upward momentum and a potential increase in selling pressure.
Potential End of Bullish Scenario
The higher high – higher low structure is often associated with bullish trends, where each successive high and low is greater than the previous one. However, the current situation presents a risk to this bullish scenario.
If the stock price drops below Rs 1,575, it could signify the end of the higher high – higher low pattern.
Such a breach would undermine the previously established upward momentum, thereby providing confirmation for the bearish sentiment.
In Conclusion
The daily chart analysis of HDFC Bank’s stock indicates a growing bearish sentiment.
The repeated resistance around Rs 1,700, the potential false breakout at Rs 1,757 according to the Wyckoff theory, the stock’s trading below the 200DEMA, and the risk of ending the higher high – higher low bullish scenario at Rs 1,575 all contribute to the bearish outlook.
Traders and investors should exercise caution and closely monitor the price action to confirm the development of the anticipated bearish trend.
At present, the stock is trading at Rs 1,594 on the BSE. Over the last 30 days, the share price is down 5.1%. And over the last one year, HDFC Bank shares are up around 5.6%.
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Brijesh Bhatia Research Analyst and expert chartist, is the editor of Alpha Wave Profits. Fully committed to his craft, Brijesh has mastered the art of making money by trading using technical analysis. Brijesh has an MBA from ICFAI and 16 years of experience in India’s financial markets. He began his career on Dalal Street as commodities dealer and it wasn’t long before he developed his own unique trading system. Brijesh worked on his trading system until it could be expected to deliver 5 units of return for every unit of risk.
