HDFC Bank Limited (NYSE: HDB)

HDFC Bank Limited, together with its subsidiaries, provides a range of banking and financial services to individuals and businesses in India, as well as in Bahrain and Hong Kong. The company operates in four segments: Retail Banking, Wholesale Banking, Treasury, and Other Banking Operations. It offers various deposit products, including savings accounts, salary accounts, current accounts, fixed and recurring deposits, demat accounts, safe deposit lockers, and rural accounts, as well as foreign currency deposits; loan products comprising personal, business, home, car, two wheeler, educational, term, gold, and rural loans, as well as working capital finance, and loans against assets and government sponsored programs; credit, debit, and prepaid cards; and private banking services.

Take a look at the 1-year chart of HDFC (NYSE: HDB) below with added notations:

1-year chart of HDFC (NYSE: HDB)

HDB has essentially been trading sideways for the last 2 months, while forming a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. HDB’s rectangle pattern has formed a $50 resistance (red) and a $46 support (green). A break above $50, which HDB has already failed to do once earlier this month, would also be a new 52-week high.

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The Tale of the Tape: HDB is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $46, or on a breakout above $50. The ideal short opportunity would be on a break below $46.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach