Midcap Bank Tanks 12%! Where is the Support？

It\\'s not common for shares of a mid-cap bank to fall a whopping 12% in a day. However, investors in Yes Bank (NS:) are witnessing a sharp fall on Monday with the stock falling 12.7% to INR 14.4 at the opening tick, despite a flat opening of the Indian markets. Yes Bank is a midcap bank with a market capitalization of INR 47,445 crores and trades at a TTM P/E ratio of 52.6 (pre-fall ratio)

The current fall might not be as gloomy for investors as some would think. Three years back, when Yes Bank was on the verge of collapse and a consortium of banks had to bail it out, all banks were restricted to liquidate their stake and it was locked in for three years. Today, as the lock-in period got over, these investors hurried to book their profits as a result of which the stock tanked in the double-digits. These banks were allotted shares at INR 10 per share, giving them a decent profit of 65% in three years (as of Fridays closing price)

Now, should you go long after a noticeable cut？ Looking at the daily chart, the stock is quite weak as it broke below its major support of INR 15.25, but intraday recovery from the lows is also good which is helping Yes Bank shares to rally back above this level. If investors want to play for a bounce back, a target till INR 16.3 seems achievable as there is a big gap left on the chart after todays gap-down opening. The stock might attempt to close this gap. However, a very strong rally is not expected as of now, therefore traders with a medium-term time horizon should wait for a strong bullish signal.

With a decent double-digit plunge in todays session, the volatility of this counter has also expanded. Despite a lower opening, the stock is still trading lower than the lower band of the Bollinger Bands® which can be deemed as a volatility breakout on the downside, not a good sign to go long. But for mean reversion traders, these are the times to capitalize on a quick bounce.