YES Bank shares trading in overbought zone are down 4% this year; what should investors do?

Shares of private sector lender YES Bank Ltd, which have surged 25% in two weeks, are trading in the overbought zone. In Friday’s session, YES Bank’s stock had a relative strength index (RSI) of 80, signaling strong buying interest in the stock. High RSI also indicates that the stock might be due for a price correction. An RSI above 70 signals that the stock is overbought and is termed oversold when it falls below 30. On the other hand, despite the current leg of rally, the YES Bank stock is still down 4.53% this year. This denotes additional buying interest in the near term could pull the stock out of the red zone on a year-to-date basis.

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In Friday’s session, YES Bank stock zoomed 4.75% intraday to Rs 21.15 against the previous close of Rs 20.19 on BSE. Stock of YES Bank has gained 22 per cent in a year. Market cap of the bank stood at Rs 59,616 crore in Friday’s trading session. YES Bank has a one-year beta of 0.3, indicating low volatility during the period.

YES Bank shares are trading higher than the 5 day, 10 day, 20 day, 50 day, 100 day, 150 day and 200 day moving averages.

With today’s up move, the banking stock has breached the resistance of Rs 19–Rs 20 level, which technical analysts had said was needed to trigger a rally on the YES Bank counter. Analysts expect the stock to reach up to Rs 40 level if the current leg of rally continues.

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Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher said, "After making a higher bottom formation, it has given a good move on the upside and also given a range breakout after a long consolidation between Rs 14 and Rs 19 zones, with strong volume-wise participation in recent days. On the weekly chart, the stock is forming a golden crossover near Rs 17 levels and a decisive move above Rs 22. The stock will go till Rs 25 levels and then scale to the new target of around Rs 40. The RSI is on the rise and well-placed, indicating strength, with further immense upside potential visible."

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Deven Mehata, Equity Research Analyst at Choice Broking said, “The stock benefits from a robust support zone within the range of Rs 16.75 – Rs 17 levels, closely aligned with key moving averages (20, 50, and 200 Day EMA). This convergence enhances the stock's stability and reinforces its potential for an upward movement. Presently, the stock is trading above all the mentioned important moving averages, signalling strength in its current trend.”

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“The Relative Strength Index (RSI), a momentum indicator, has rebounded to around 80 levels, indicating a recent surge in positive momentum. It may advance toward the next resistance level of Rs 22.40. This potential upward movement provides an opportunity for investors. For those holding the stock from lower levels, booking partial profits at the current market price is a prudent strategy. Additionally, trailing stop loss orders can be implemented to protect gains and allow for further upside potential,” added Mehata.

AR Ramachandran from Tips2trades said, "YES Bank is bullish but also overbought on the daily charts with next resistance at Rs 20. Short-term traders & investors should be booking profits at current levels as a daily close below support of Rs 18.45 could lead to a target of Rs 15.8 in the near term. Whereas a daily close above resistance of 20 could lead to an extended target of 22.6 in the near term."

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