Bellwethers. Weekly Trading Guide

SBI hovers below a crucial resistance (₹280.2)

SBI managed to sustain above the 200-day moving average support around ₹270 and bounced 2.4 per cent last week. A crucial resistance is poised near current levels at ₹284. Inability to break above it can drag the stock lower to ₹270 and keep it range-bound between ₹270 and ₹284 for some time. A breakout on either side of ₹270 or ₹284 will then decide the next move. If SBI manages to breach above ₹284 decisively,the downside pressure may ease and a rise ₹288 is possible initially. Further break above ₹288 will increase the likelihood of the rally extending to ₹295 and ₹298. On the other hand, if SBI declines below ₹270, the selling pressure will increase. It will confirm the head and shoulder reversal pattern. Such a break can take the stock lower to ₹265 immediately. Further break below ₹265 will increase the possibility of the stock tumbling to ₹245 — the target level of the reversal pattern — or even to ₹240. Traders can wait and initiate short positions if SBI breaks below ₹270. Stop-loss can be placed at ₹277 for the target of ₹248.

Immediate outlook is unclear for ITC (₹334.1)

ITC opened with a wide gap-up and surged 9 per cent intra-week to a high of ₹353. But the stock failed to sustain the momentum and fell giving back most of the gains made and closed just 3 per cent higher for the week. The immediate outlook is not clear. Resistance is around ₹340. Inability to rise past this hurdle can increase the possibility of the stock falling to ₹327 this week. If ITC manages to bounce from ₹327, an upmove to ₹335 and ₹340 is possible. But if the stock breaks below ₹327 decisively, the downside pressure may increase. Such a break will also increase the likelihood of the downmove extending to ₹318 or ₹316. The presence of the 21-day moving average and a trend line support around ₹316 reduces the possibility of the stock falling further below the ₹316 level. A strong bounce from ₹316 will then see the stock moving higher to ₹327 and ₹330. Traders can stay out of the stock. Watch the price action, which might give some cue on the next direction of move and take trade positions accordingly.

Infosys is range bound and volatile (₹936)

Infosys continued to remain volatile and range-bound for the fourth consecutive week. The view on this stock remains unchanged. It may continue to remain in a sideways range between ₹920 and ₹970 for some more time. Within this range, the stock is currently moving down and is likely to fall to ₹925 and ₹920 if it breaks below ₹930. An upward reversal from ₹920 can take the stock higher to ₹960 and ₹970 levels. But if the stock breaks below ₹920, it can fall to ₹910 or ₹900. A bounce from ₹900 will keep intact the broader ₹900-₹1,045 sideways range that has been in place since November 2016. It will then increase the possibility of the stock rising back to ₹950 and ₹970 levels. The stock will gain fresh momentum only if it breaks above ₹970 decisively. Such a break will ease the downside pressure and take the stock higher to ₹1,000 or even higher thereafter. On the other hand, break below ₹900 can take Infosys lower to ₹875 initially. Further fall below ₹875 can drag it to ₹850 and ₹830. Investors can hold the long positions.

Uptrend gains momentum in RIL (₹1,490.8)

RIL reversed higher last week as expected after testing the 21-day moving average support. The stock shot up 8 per cent breaking above the key resistance level of ₹1,450. The psychological resistance at ₹1,500 is likely to be tested this week. Inability to break above it can take the stock lower to ₹1,460 or ₹1,450 and keep it range-bound between ₹1,450 and ₹1,500 for some time. Strong support is in the ₹1,455-₹1,450 zone. An immediate break below ₹1,450 is less probable. An eventual break above ₹1,500 will increase the likelihood of the stock extending its rally to ₹1,600 and ₹1,625. But, this rally may get delayed if RIL declines below ₹1,450. Such a break can trigger an intermediate fall to ₹1,400 or ₹1,375. However, the downside in the stock is expected to be limited as such intermediate falls might attract fresh buyers to the stock. Investors can hold the long positions. Revise the stop-loss higher to ₹1,315. Book partial profits at ₹1,600 and move the stop-loss on the rest of the holdings to ₹1,425 thereafter.

Tata Steel is in an uptrend (₹553.8)

Tata Steel inched higher but at a slower pace after surging over 7 per cent in the week earlier. If the stock declines below the immediate support at ₹545 , a fall to ₹534 is possible. A break below ₹534 is less probable. But if it happens, it can take the stock further lower to ₹525 or even ₹520. Having said that, an upward reversal from ₹534 can take the stock higher to ₹550 and ₹560. On the other hand, if Tata Steel manages to sustain above the immediate support at ₹545 this week, it can rise to test the next resistance at ₹570. A pull-back from ₹570 can trigger a corrective fall to ₹550 or even lower. But if the stock manages to rise past ₹570, it can rise further to ₹580 — the next significant long-term resistance level. The price action around ₹580 will need a close watch; whether the stock breaks further above ₹580 or not will decide the next move. Investors can hold the long positions with a stop-loss at ₹480. Revise the stop-loss higher to ₹495 as soon as the stock moves up to ₹565.

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