Karnataka Bank shares need 13% jump to reclaim 52-week high; more legs to the rally?

Karnataka Bank shares have rallied over 16 per cent in two trading sessions, breaching the initial target set by Systematix Shares and Stocks (India) Limited based on technical charts. If one goes by the brokerage, the stock has potential to climb higher. Its target still trailed the stock's 52-week high of Rs  231.20 apiece.  

In a note today, the brokerage said the scrip formed a large bullish candle in the previous session, signalling strong demand. More importantly, the stock price closed above the 20-, 50-, 100-, and 200-day simple moving averages, confirming that the short-term, medium-term, and long-term trends have all shifted firmly in favour of the bulls. 

The move, Systematix said, accompanied a bullish breakout from a falling channel pattern on the daily line chart. The breakout was backed by strong price momentum and above-average volume, indicating genuine buying interest rather than a speculative spike. 

"Volume behaviour further strengthens the bullish outlook. High-volume accumulation is clearly visible on daily, weekly, and monthly charts, suggesting consistent participation from strong hands. The stock has also resumed its higher-top, higher-bottom formation, confirming a bullish continuation structure as per Dow Theory. Additionally, the price has closed above the upper band of the Bollinger Bands, indicating a positive volatility breakout," it said based on Friday's upmove.  

On the higher timeframe, the stock traded above the last four weekly highs adds more conviction to the on-going trend reversal. The recent upswing also comes after a healthy 43 per cent correction from its all-time high of Rs 286, making the current breakout structurally stronger. 

"The stock repeatedly respected the neckline support near Rs 164, which aligns with the 50% Fibonacci retracement level measured from Rs 34.20 to Rs 286.35. This area has acted as a strong demand zone, preventing deeper declines and allowing the price to form higher bottoms. Momentum indicators further support the bullish bias: the ADX has triggered a fresh buy signal with +DI crossing above –DI on both daily and weekly charts, while MACD and RSI readings reinforce positive momentum in the near term," Systematix said.

Considering these strong bullish developments, the domestic brokerage believes Karnataka Bank offers an attractive buying opportunity. "One can buy the stock in the range of Rs 188–Rs 186 with a stop-loss at Rs 173 and look for upside targets of Rs 204 and Rs 218 in the near term, Systematix noted. 

Earlier today, the scrip breached the initial target of Rs 204, which was its day's high at the time of writing this report. The stock rose 8 per cent today and was up 16.47 per cent over the two-session period. The stock hit a 52-week high of Rs 231.20 on December 12, 2024.