The result on Friday was a disaster. Now, of course, the question is whether the market will see this attempt to clear out the books as something positive. If you take the provisions out, then the bank has a decent profit. But the main problem with Yes Bank is confidence in the announcements.
All brokerages have uniformly downgraded Yes Bank with perhaps the exception of Motilal, which had a buy reco earlier and continues to maintain the buy. Macquairie went so far as to apologize for their wrong call on the stock- something not seen too often among research reports. The lowest target price given by these big brokers is 125….which is a far cry from where the stock is today.
Moving to the charts we find that Yes Bank has fared well recently. Annual gains are a solid 30% but prices have slipped in this month, losing 14% of which 7% fall was in the last week. So it seems to be a case of disappointment here and the declines are more owing to long liquidations from those that had bought earlier. Shorts, probably, are yet to come into the stock.
Prices are likely to start with a down gap today, given the consensus of downgrades. Last close 238. Taking 10% off means 215. The 50% retracement of the up move of the last couple of months is at 216. The Pivot extension is also found at 217. So that should be the first port of call for support. We need to check what happens if and when prices trade down there, probably early in the morning.
The earliest upper side trigger is at 240. Hence that is also the stop on any shorts that one may choose to create. Given the newsflow, one may watch how prices handle this level, if at all, during the day before deciding any longs. The major resistance for the stock on the way up now would be around 260-62. If prices get to those levels, better to exit any longs for now.
What if prices go even lower? Well, 62% retracement is 200 as is a weekly and monthly pivot extension level. So that is the level to make for if 216 breaks.
The rise into the April high was to the level of 50% of the prior fall and the rise also could not work up bullish looking momentum credentials. That meant a retest of the lows. For now, the 200-215 zone could be good enough for such a retest if the stock intends to remain up. Any break of this support zone would mean the stock may not be getting into an uptrend for several months ahead. This is important from an investing point of view.
The weakness was much more than anticipated and the stock started the day at the second support mentioned (200) and continued headlong. In the process, it has broken all weekly and monthly support and the gap created above at 203 will now act as the resistance. In all probability, the monthly pivot for May also will shift downward to near those levels tomorrow and hence that is the zone to short during any rally.
The first fall back in Oct 2018 itself had brought prices down to the 62% retracement level. Usually, such moves lead to consolidation or a triangle type move ahead. Hence it is unlikely that we may have too deep a downside beyond what we have seen today. Perhaps a dip till 165-70 levels on momentum.