Technical Analysis

Pivotals – Reliance Industries (Rs 866.8)

Yoganand D. | Updated on October 22, 2011 Published on October 15, 2011

Reliance Industries surged 8 per cent with good volumes in the previous week in line with our view. Friday's 2.4 per cent gain accompanied by above average volumes has helped the stock breach its immediate key resistance at Rs 850. The short-term outlook has turned bullish for the stock. Traders can hold their long position while maintaining stop-loss at Rs 845. The stock can continue its up move to Rs 880 and Rs 900 in the week ahead. However, it would be difficult to move beyond Rs 900 in the first attempt and a small pause is likely before the stock resumes higher as it is an important long-term resistance level.

Moreover, the band between Rs 900 and Rs 910 is a medium-term decider band. A strong breakthrough the aforesaid band will take the stock higher to Rs 950 and then to Rs 985 in the medium-tem. Investors with medium-term perspective can consider holding the stock with stop-loss at Rs 750. Key supports for the week are at Rs 810, Rs 788 and 765.

State Bank of India (Rs 1,882.5)

The stock rebounded Rs 130 or 7.5 per cent with extra-ordinary weekly volumes in the last week after forming a significant support for the ensuing time period at around Rs 1,750. Short-term trend is turning positive as the stock was able to close slightly above Rs 1,875 levels. Traders with short-term perspective can initiate long positions with stop-loss at Rs 1,830 levels. Targets are Rs 1,950 and Rs 2,006. However, a drop below Rs 1,830 will drag the stock down to Rs 1,795 and to Rs 1,750. Key support below these levels is at Rs 1,600.

Medium-term trend continues to be down from its April high of Rs 2,959 levels. An emphatic move above Rs 2,500 will alter the downtrend and take the stock higher to Rs 2,755 levels.

Tata Steel (Rs 438.4)

In line with our expectations, the stock moved higher and achieved our price target in the previous week. The stock rose Rs 18 or 4.5 per cent last week. This is a bullish confirmation for the hammer candlestick pattern formed the week before. Short-term traders can prolong their long positions with stop-loss at Rs 422. Upside targets are Rs 455 and then the resistance range between Rs 470-475. Conversely, fall below Rs 420 will mitigate the short-term positive bias and pull the stock down to Rs 410 and Rs 400.

Since its April peak of Rs 641, the stock has been on a medium-term downtrend. Only a decisive rally beyond Rs 520 will reverse this downtrend. But, plunge below its immediate key support at around Rs 400 can strengthen the downtrend and drag the counter down to Rs 369 in the medium-term.

Infosys (Rs 2,744.6)

Infosys sky-rocketed Rs 237 or 9.5 per cent with good volumes in the previous week. However, the stock is currently testing key resistance and the trend deciding band between Rs 2,700 and Rs 2,750. Emphatic rally above this band would take the stock higher to Rs 2,825 and to Rs 2,900 in the weeks ahead. Inability to surpass the resistance band can pull the stock lower to Rs 2,600 or it can remain range-bound between Rs 2,550 and Rs 2,750. Immediate key support and resistance are positioned at Rs 2,600 and Rs 2,800 respectively.

Short-term trend has been up for the stock from its 52-week low of Rs 2,169 registered on August 25. As long as the stock trades above Rs 2,450, its short-term trend remains up.

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