Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on April 22, 2018 Published on April 22, 2018

SBI (241.4)

Pressure is mounting on SBI as it has been falling over the last couple of weeks. The stock has tumbled 7 per cent over the last two weeks, indicating that the downtrend is intact. The immediate support at ₹231 is likely to be tested in the coming days. A bounce from ₹231 can keep SBI in a sideways range between ₹230 and ₹260. But the price action and indicators on the chart suggest that SBI is vulnerable to decline below ₹231. The 100-day moving average is on the verge of crossing below the 200-day moving average. Similarly, the 21-week moving average has crossed below the 55-week moving average, indicating limited upside. The resistance at ₹250 can cap the upside. A strong break below ₹231 can take SBI lower to ₹220 or ₹215 initially. Further break below ₹215 will see the stock tumbling towards ₹190 over the medium term. Traders can go short at current levels and at ₹248. Stop-loss can be placed at ₹258 for the target of ₹205. Revise the stop-loss lower to ₹242 as soon as the stock moves down to ₹228.

ITC (₹275.9)

ITC surged 5.8 per cent, breaking above the key resistance level of ₹266 in the past week. The strong rally has turned the short-term outlook positive. Immediate support is at ₹272 — the 200-day moving average and the next key support is at ₹268. These supports can limit the downside as dips to these levels are likely to bring fresh buyers into the market. The current up-move can extend to ₹282 in the coming days. A break above ₹282 will see the rally extending to ₹286 or ₹288. Short-term traders can go long on dips at ₹273 and can accumulate at ₹269. Stop-loss can be placed at ₹267 for the target of ₹285. Revise the stop-loss higher to ₹278 as soon as the stock moves up to ₹282. The bullish outlook will get negated only if ITC declines below ₹268 decisively. Such a break will increase the likelihood of the stock falling towards ₹263 or ₹261 again. But the pace of fall could be slow as a cluster of moving average supports are poised ₹266 and ₹263. Investors can hold the long positions and retain the stop-loss at the level of ₹220.

Infosys (₹1,178.2)

Though Infosys opened with a wide 70-point gap down last week, it managed to claw-back . The stock reversed sharply higher from its low of ₹1,099 and recovered all the losses. Technically, the psychological support level of ₹1,100 is continuing to hold well. The sharp bounce back from this support indicates the presence of fresh buyers at low levels. It also keeps the ₹1,100-₹1,200 sideways range intact. The stock has been stuck in this range since February. A breakout on either side of ₹1,100 or ₹1,200 will decide the next trend. The bias remains bullish for Infosys to breach ₹1,200 . Such a break can take the stock higher to ₹1,250 and ₹1,280. A strong break above ₹1,280 will then pave the way for the stock to target ₹1,350 or even higher levels over the medium term. On the other hand, Infosys will come under pressure only if it breaks below the ₹1,100-₹1,090 support zone. In such a scenario, a short-term corrective fall to ₹1,050 or ₹1,030 is possible. Medium- and long-term investors can hold the long positions.

RIL (₹928)

RIL seems to be losing momentum after rallying for two consecutive weeks. The stock made a high of ₹948 and turned around giving back all the gains, and closed 1.2 per cent lower for the week. The broader ₹870-₹960 sideways range remains intact. The stock has been stuck in this range for a prolonged period of time. Immediate outlook is unclear. The cluster of supports in between ₹920 and ₹910 are likely to be tested in the near term. If RIL declines below the ₹910 level, it can fall to ₹890 or ₹880 again. On the other hand, if the stock manages to sustain above ₹910 and reverses higher, the downside pressure may ease. In such a scenario, the stock can move higher towards ₹950 or ₹960 once again. A strong break above ₹960 is needed for RIL to gain fresh momentum. Such a break will increase the likelihood of the stock rallying towards ₹1,000 and ₹1,025 levels thereafter. On the other hand, the outlook for the stock will turn bearish if it breaks below ₹870. Such a break can drag RIL lower towards ₹840 or even lower levels.

Tata Steel (₹606.35)

The relief rally in Tata Steel extended for the fourth consecutive week. The stock was up about 2 per cent last week. The 21-day moving average at ₹589 is providing strong support. The near-term will remain positive while the stock sustains above ₹600. An up-move to test the crucial ₹630-₹635 resistance region is likely in the short term. Whether Tata Steel breaks above this resistance region or not will determine the next leg of move. A strong break above ₹635 will see the corrective rally extending towards ₹650 or ₹655. But a pull-back move from the ₹630-₹635 resistance region can drag it to ₹615 or ₹600 again. The stock will come under renewed pressure only if it breaks decisively below the 21-day moving average support. Such a break can drag the stock towards ₹560 and ₹550. Traders with high-risk appetite can go long. Stop-loss can be placed at ₹585 for the target of ₹635. Revise the stop-loss higher to ₹612 as soon as the stock moves up to ₹622.

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