Weekly trading guide: SBI, ITC, Infosys, RIL, Tata Steel

SBI is likely to extend its downmove

SBI (₹301.8) fell for the third consecutive week. The stock was down 1.4 per cent last week. The near-term outlook remains bearish. A fall below ₹300 towards ₹296 and ₹294 is likely in the coming days. If SBI manages to reverse higher from around ₹294, a relief rally to ₹300 is possible initially. A break above ₹300 will ease the downside pressure and take the stock higher to ₹305 or even ₹310 thereafter. But if SBI breaks decisively below ₹294, there is a strong likelihood of the downmove extending further to ₹285. The region around ₹285 is a key short-term support with the potential to halt the current downmove. A strong upward reversal from around ₹285 will increase the possibility of the stock rallying towards ₹300 or even higher thereafter. As such the price action around ₹285 will need a close watch to get a cue on the next leg of move. Traders can hold the short positions. Revise the stop-loss lower to ₹310. Move the stop-loss further lower to ₹303 as soon as the stock moves down to ₹299 for the target of ₹294.

Supports to limit the downside in ITC

ITC (₹267.5) surged over 4 per cent intra-week, breaking above the key resistance level of ₹267 and made a high of ₹273.8 last week. However, it fell back from the week’s high giving back most of the gains to close the week just 1.7 per cent higher. Immediate support is at ₹266. If ITC manages to reverse higher again from this support in the coming days, it can strengthen the bullish momentum and go to ₹272 and ₹273 levels again. A strong break and a decisive close above ₹273 will then pave the way for the next target of ₹280. Even if the stock breaks below ₹266 this week, the next significant supports between ₹264 and ₹263 and then at ₹260 can limit the downside. The outlook will turn bearish only if ITC declines decisively below ₹260, which looks less probable at the moment. Traders can hold the long positions with the revised stop-loss at ₹265 for the target of ₹275. Revise the stop-loss higher to ₹268 as soon as the stock moves up to ₹272. Short-term traders who do not hold any positions can initiate fresh long positions at current levels and also accumulate on dips at ₹264. Keep the stop-loss at ₹259 for the target of ₹280. Revise the stop-loss higher to ₹270 as soon as the stock moves up to ₹274.

Infosys clears the hurdle for a long-term rally

The prolonged wait is over. Infosys (₹1,078.4) finally cleared the key hurdle of ₹1,045 after struggling for over 14 months. The stock surged over 6 per cent last week to close on a strong note above ₹1,045. This gives an initial confirmation that the downtrend that was in place since June 2016 has reversed. Infosys is now all set to target ₹1,350 over the long-term. A near-term dip to ₹1,050-₹1,045 cannot be ruled out before the stock extends its upmove. Strong support is now available in the broad ₹1,045-₹1,000 region. Only a decisive fall below ₹1,000 will turn the outlook bearish. But such a break is unlikely as any intermediate dips in the stock will now attract fresh buyers. Next resistance is at ₹1,120 which is likely to be tested in the short-term. A strong break above ₹1,120 will then clear the way for the next target of ₹1,200 over the medium-term. Investors can hold the long positions. Traders with a medium-term perspective can go long on dips at ₹1,060 and accumulate at ₹1,050. Keep the stop-loss at ₹980 for the target of ₹1,180.

RIL likely to test a crucial resistance level

RIL (₹946.7) surged breaking above the key resistance level of ₹937 last week. The stock was up 2.6 per cent last week. The region between ₹937 and ₹935 will now serve as a strong support for the stock in the near-term. As long as the stock remains above this support zone, there is a strong likelihood of it rallying to test the crucial resistance level of ₹960 in the coming days. Whether it breaks above ₹960 or not will then determine the next move. A strong break above ₹960 will boost the momentum. Such a break will pave the way for RIL to target the psychological ₹1,000 mark going forward. It will also wipe out the threat of the double-top reversal pattern formation on the chart that we have been reiterating in this column over the last few weeks. But if the stock reverses lower from ₹960 it can fall to ₹940 or ₹935 again. The possibility of the stock extending its downmove towards ₹910 or even ₹900 cannot be ruled out. In such a scenario, RIL can remain in the ₹880-₹960 sideways range for some more time.

Uptrend is intact in Tata Steel

After a strong surge for three consecutive weeks, the rally in Tata Steel (₹771) paused last week. The stock was stuck in a narrow range between ₹760 and ₹780 last week. Resistance is around ₹785. As long as the stock remains below this hurdle, an intermediate dip to ₹745 or ₹740 cannot be ruled out. Further fall below ₹740 looks less probable at the moment. A range bound move with a bullish bias between ₹740 and ₹785 can be seen for some time in such a scenario. An eventual break and a decisive weekly close above ₹785 will boost the momentum. Such a break will take the stock higher to the next targets of ₹830 and ₹850. It will also increase the possibility of the stock targeting ₹930 and ₹950 over the long-term. Investors can hold the long positions. Retain the stop-loss at ₹640 and revise it higher to ₹680 as soon as the stock moves up to ₹800. As mentioned last week, investors can consider booking partial profits around ₹900 levels. A trendline support at ₹710 and the 100-day moving average at ₹694 are the key supports for Tata Steel. The outlook will turn negative only if it declines below ₹694 decisively, which looks unlikely at the moment.

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