Bellwethers: Weekly trading guide

SBI (₹287.4)

SBI was range-bound and has closed on a mixed note last week. Key support is at ₹279.5 – the 21-week moving average and resistance is at ₹291. A breakout on either side of ₹279.5 or ₹291 will decide the next move. The bias on the chart remains bullish. The price action in the past week indicates that the stock lacks strong follow through selling after tumbling over 6 per cent in the week earlier. Also, the downside is expected to be limited to ₹273 – a trend line support, even if the stock breaks below ₹279.5. That said, an eventual break above ₹291 can take the stock higher to ₹295 initially. Further break above ₹295 will see SBI surging to ₹310 and ₹315 levels. Such a rally will also imply that there is high possibility for the stock to test the key long-term resistance region of ₹327-₹330. Whether the stock manages to rise past ₹330 or not will be key in deciding the next trend. Investors can hold the long positions. Retain the stop-loss at ₹270. Book partial profits of about 25 per cent of your holding at ₹325 and then move the stop-loss higher to ₹280 on the rest.

ITC (₹319.1)

ITC continues to trade strong. The stock surged for the third consecutive week and has closed 3.4 per cent higher. The bullish outlook is intact. Immediate supports are at ₹315 and ₹311. Next strong support is at ₹305. A rise to ₹335 and ₹340 – the target level of the cup and handle pattern on the chart - is likely in the coming weeks. Further break above ₹340 will see the rally extending to ₹350 levels thereafter. Investors can hold the long positions. Revise the stop-loss higher to ₹290 for the target of ₹330. Move the stop-loss further higher to ₹310 as soon as the stock moves up to ₹325. The region between ₹300 and ₹290 is a strong support for the stock. The outlook will turn negative only if ITC declines below ₹290. But such a break looks less likely at the moment. Also from a long-term perspective, the break above ₹300 is very significant as it indicates a channel breakout. As long as the stock sustains above ₹300, there is a strong likelihood of the stock targeting ₹380. A strong break above the next key resistance at ₹350 will pave way for this rally.

Infosys (₹969.4)

Infosys failed to breach the psychological ₹1,000 mark and fell 2.7 per cent last week. Immediate resistance is at ₹975. Inability to rise above this hurdle can keep the stock under pressure in the near term. While below ₹975, a fall to ₹956 or ₹950 — the next key supports for the stock — is possible in the coming days, a further fall below ₹950 looks less probable. An upward reversal from either ₹956 or ₹950 can take the stock higher to ₹1,000. It will also increase the likelihood of it breaking above this psychological hurdle. Such a break can take the stock higher to ₹1,020. Further break above ₹1,020 will see the up-move extending to ₹1,045 — the upper end of the broad ₹900-1,045 sideways range that has been in place since November 2016. Inability to break above ₹1,045 will keep the sideways range intact and increase the likelihood of the stock falling to ₹1,000 or even lower levels. If the stock manages to breach above ₹1,045 decisively, it can rise to ₹1,075 and will signal the beginning of a fresh leg of a long-term up-move. Investors can hold the long positions.

RIL (₹1,324.7)

RIL opened the week on a positive note and rose initially. But the up-move lost steam. The stock reversed sharply lower after making a high of ₹1,368 on Wednesday, thereby giving up all the gains made during the week. Immediate support is at ₹1,314. A strong break below this support will increase the likelihood of the stock falling to ₹1,300 or ₹1,285. Further fall below ₹1,285 looks less probable at the moment. But if seen, can drag the stock lower to ₹1,265. But, if RIL manages to sustain above ₹1,314 and bounces higher, a rise to ₹1,350 and 1,375 can be seen once again. As mentioned last week, ₹1,375 is a key resistance which should be broken for the stock to gain fresh momentum. A strong break and a decisive weekly close above ₹1,375 will give an initial confirmation that the corrective fall that has been in place since last week of April, has ended. In such a scenario, the possibility of the stock rallying to ₹1,425 or even higher levels thereafter will remain high. Investors can hold the long positions and retain the stop-loss at ₹1,215.

Tata Steel (₹491.6)

Tata Steel failed to sustain above the psychological mark and fell sharply from the high of ₹520 to close about 4 per cent lower for the week. Inability to bounce above the immediate resistance at ₹496 can increase the possibility of the stock extending its downmove to ₹480 in the coming days. Further fall below ₹480 looks less likely. Also, a cluster of supports are poised around ₹470. So the downside is expected to be limited to ₹470 even if the stock breaks below ₹480 in the coming days. An upward reversal from ₹480 can take the stock higher to ₹500 once again. A strong break and a decisive weekly close above ₹500 will then pave way for the next targets of ₹520 and ₹535. As being reiterated in this column, ₹535 is a crucial long-term trend resistance for the stock. Whether Tata Steel manages to break above ₹535 or not will decide the next trend for it. Investors holding long positions can revise the stop-loss higher to ₹425. Book partial profits on 20 per cent of your holdings at ₹535 and move the stop-loss higher to ₹460 for the rest.

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