Tech view: Divestment news can trigger up to 25% rally in IOB, Central Bank

The stock of Central Bank of India is poised to breakout on the upside if it manages to conquer the resistance of Rs 25.50 with a stable upmove

PSU Bank stocks are back on investor radar this week after a media report suggested the government may soon initiate the process to privatise Central Bank of India and Indian Overseas Bank. The report further suggested the two lenders might see 51 per cent sale in the first phase of disinvestment.

Reacting to the development, shares of both these lenders got locked in the 20 per cent upper circuit on Monday and extended thier rally to jump 16 per cent (IOB) and 17 per cent (Central Bank of India) on Tuesday and claimed fresh 52-week highs.

That apart, J&K Bank, Indian Bank, Canara Bank, Bank of Baroda, PNB, Union Bank of India, Uco Bank, and SBI were up in the range of 1 per cent to 7 per cent at 2:15 PM. In comparison, the benchmark Nifty50 index was up 0.4 per cent while the Nifty PSU Bank index quoted 0.8 per cent higher.

After a nearly 40 per cent surge in two days, are the privatisation-bound PSBs still attractive? Here's a chart check:
 
NIFTY PSU BANK

Likely target: 2,660 and 2,710 (after crossing Rs 2,550)

Upside potential: 4% and 6%

The index is making efforts to cross the resistance of 2,550 levels, as per the daily chart. Now, although the technical indicators are trading with a negative crossover, the price action is showing an upside trend. Thus, if this momentum manages to conquer the resistance decisively, the upside bias may see a rally towards 2,660 and 2,710 levels. CLICK HERE FOR THE CHART
 
Central Bank of India (CENTRALBK)

Likely target: Rs 30 and Rs 32

Upside potential: 15% and 23%

The stock is poised to breakout on the upside if it manages to conquer the resistance of Rs 25.50 with a stable upmove, as per the weekly chart. This breakout may see a rally towards Rs 30 and Rs 32 levels. Although, the RSI has entered the overbought territory, the stock price is not showing any major weakness. CLICK HERE FOR THE CHART
 
Indian Overseas Bank (IOB)

Likely target: Rs 29 and Rs 32

Upside potential: 13% and 25%

This divestment candidate has managed to conquer the resistance of Rs 22 levels decisively, and is on course to hit Rs 29 and Rs 32 levels. The positive breakout is strongly supported by heavy volumes which indicates a positive bias among market participants. The Moving Average Convergence Divergence (MACD) is gradually rising upwards, suggesting a stable rally. The overall trend has a closing basis support of Rs 20 levels. CLICK HERE FOR THE CHART
 
The Jammu & Kashmir Bank Limited (J&KBANK)

Likely target: Rs 48 and Rs 52

Upside potential: 15% and 25%

The stock has crossed the medium-term resistance of Rs 36 levels, as per the weekly chart, which is supported by strong volumes. The overall trend is heading towards Rs 48 and Rs 52 levels, as per charts. Now, as long as the counter holds support level of Rs 35, the upside bias is expected to continue. CLICK HERE FOR THE CHART
 
Indian Bank (INDIANB)

Likely target: Rs 160 and Rs 165

Upside potential: 5% and 8%

The stock of Indian Bank is attempting to cross the hurdle of Rs 150 on a closing basis. Once that happens, the breakout may push the stock towards Rs 160 and Rs 165 levels. The volumes are seeing a gradual build-up, which is expected to rise may in the coming sessions. The RSI has made a positive crossover by crossing the trendline resistance at 60 value, underscoring the inherent strength. The immediate support comes at Rs 147 levels.  CLICK HERE FOR THE CHART