Lots of articles and fundamental pieces of analysis have been written on brilliant post-sanction conditions affecting banking sector in Iran. This article is intended to discover whether or not the potential for so-called boost in banking sector exists. In order to do so, we are going to have a look and analyze the sectors benchmark chart from technical point of view.

Below is the all-time index chart of banks traded in Tehran Stock Exchange on a daily basis. As it is apparent at the first look, the index has recently bounced a bit back from the uptrend channel drawn in logarithmic scale. But is this revers going to last and form a trend change?

Banking Sector1

This area (around 600 level) is considered as a major support not only due to the trend line, also because the %61.8 expansion ratio of probable ABC correction is overlapping %38.2 retracement of the previous impulse wave at about 625 level. The short-term bearish trend has broken up at 613 level which is considered as a primary sign of continuous gain. The regular divergence is seen in MACD oscillator and implies another sign of trend reversal which -in our belief- is a correction from a bullish trend lasted for 18 months. The 600 area is also a horizontal support zone of 2013 highs depicted in the chart below.

Banking Sector 2

Breaking above 730  736 zone triggers a very likely all-time new high in the benchmark as this area is the most solid resistance overlapping both %61.8 retracement from the high of 836 zone to the low at 576 hit on January 2015 and also the bearish trend which covers all highs during almost past two years of decline. If this level is passed, our expectation is to form a new high on the chart at 906 and 996 zones respectively.

From the timing point of view, it is noteworthy to mention that the most probable period in which we expect to be at a high, is estimated at about 106 trading days due to the time extension shown in the chart below.

Banking Sector 3

To conclude from all above factors, we expect the bottom has formed in the banking index chart, as long as the support at 600 zone is held, meaning that it is more likely to see bulls take control of the action in near future. In contrary, in order to consider this analysis as failed, the first trigger for the index is to break below 600 level although we believe is less likely to happen.

Lots of articles and fundamental pieces of analysis have been written on brilliant post-sanction conditions affecting banking sector in Iran. This article is intended to discover whether or not the potential for so-called boost in banking sector exists. In order to do so, we are going to have a look and analyze the sectors benchmark chart from technical point of view.

Below is the all-time index chart of banks traded in Tehran Stock Exchange on a daily basis. As it is apparent at the first look, the index has recently bounced a bit back from the uptrend channel drawn in logarithmic scale. But is this revers going to last and form a trend change?

Banking Sector1

This area (around 600 level) is considered as a major support not only due to the trend line, also because the %61.8 expansion ratio of probable ABC correction is overlapping %38.2 retracement of the previous impulse wave at about 625 level. The short-term bearish trend has broken up at 613 level which is considered as a primary sign of continuous gain. The regular divergence is seen in MACD oscillator and implies another sign of trend reversal which -in our belief- is a correction from a bullish trend lasted for 18 months. The 600 area is also a horizontal support zone of 2013 highs depicted in the chart below.

Banking Sector 2

Breaking above 730  736 zone triggers a very likely all-time new high in the benchmark as this area is the most solid resistance overlapping both %61.8 retracement from the high of 836 zone to the low at 576 hit on January 2015 and also the bearish trend which covers all highs during almost past two years of decline. If this level is passed, our expectation is to form a new high on the chart at 906 and 996 zones respectively.

From the timing point of view, it is noteworthy to mention that the most probable period in which we expect to be at a high, is estimated at about 106 trading days due to the time extension shown in the chart below.

Banking Sector 3

To conclude from all above factors, we expect the bottom has formed in the banking index chart, as long as the support at 600 zone is held, meaning that it is more likely to see bulls take control of the action in near future. In contrary, in order to consider this analysis as failed, the first trigger for the index is to break below 600 level although we believe is less likely to happen.