Kagi chart setup suggests buying opportunity in Punjab National Bank

One can consider booking profit near Rs 56 and higher side towards Rs 67 mark, while the stop loss can be Rs 34.

What is Kagi chart?

Kagi charts are used to display the general levels of supply and demand of a particular asset by visualising the price actions through a series of line patterns. These charts are time-independent and help filter out the noise that can occur on other financial charts.

While Kagi charts do display dates or time on their x-axis, these are in fact markers for the key price action dates and are not part of a timescale. The y-axis on the right-hand side is used as the value scale. When a horizontal line joins a rising line with a plunging line it’s known as a “shoulder”, a horizontal line connecting a plunging line with a rising line is a “waist”. Sometimes the lines are thin and sometimes they are thick and bold.

Why to Buy Punjab National Bank (PNB)?

Traders use the shift from thin (Yin) to thick (Yang) lines (and vice versa) as signals to buy or sell an asset. A Yin to Yang shift indicates buy, while a Yang to Yin shift means sell.

Daily price fluctuations can make it extremely difficult for traders in the financial markets to determine the true trend of an asset. Luckily for them, methods such as Kagi charting have put an end to focusing on unimportant price moves that do not affect future momentum. At first, a Kagi chart can seem like a confusing series of randomly placed lines, but in reality, the movement of each line depends on the price and can be used to generate profitable trading signals.

Buy signal

PNB is trading with a bullish bias, which is indicated by thick green lines on the Kagi chart. This script is trading in rising channel plotted by connecting support and resistance points which shows that stock is in rising mode and can be bought till the lower trend line is intact. Recently it has given a breakout and formed rising shoulders pattern as well; denotes prices have given trend reversal breakout and trading higher. Understanding this price action, one should opt for buy on dip strategy and accumulate this stock.

Figure.1. Kagi and Buy signal on PNB

Profit-booking

One can use previous ‘waist’ for profit booking, using a Kagi chart method. These levels are standing around Rs 56 and should provide immediate resistance on the higher side, moving further Rs 67 will attract more profit bookings. So one can consider profit-booking near Rs 56 and higher side towards Rs 67 mark.

Stop Loss

The entire bullish view negates on a breach of immediate support zone or the ‘waist’ and in the case of PNB, we will consider Rs 34 as a stop loss level on a closing basis.

Conclusion

We recommend buying Punjab National Bank (PNB) above Rs 40, with a stop loss of Rs 34 for higher targets of Rs 56-67 as indicated in the above chart.

Source: Moneycontrol.com