Technical Analysis

Weekly trading Guide

Gurumurthy K | Updated on May 14, 2018 Published on May 13, 2018

SBI (250.9)

SBI rose 3.7 per cent last week. This rally has eased the downside pressure and turned the near-term view positive. So, traders can exit and book loss on the short positions taken a couple of weeks back. An immediate resistance is in the ₹253-₹254 region, which is likely to be tested in the early part of the week. A break above ₹254 can take the stock higher to ₹259 and ₹260. Further break above ₹260 can extend the up-move to ₹264 and ₹265. The level of ₹265 is a crucial short-term resistance. Inability to breach this hurdle can pull the stock lower to ₹255 and ₹250. In such a scenario, SBI can remain range-bound between ₹230 and ₹265 for some time. If SBI breaks above ₹265 decisively, it can gain fresh momentum. Such a break will ease the downside pressure and take the stock higher to ₹270 or even ₹280 levels in the coming weeks. It will also signal that the downtrend that has been in place since November last year has come to an end.

ITC (₹283.9)

ITC reversed higher last week and was up 2.3 per cent. The 55-week moving average at ₹277 has been providing strong support for the stock over the last two weeks, keeping the overall bullish outlook intact. However, a crucial resistance cluster is ahead in the ₹285-₹290 region. ITC has to breach above ₹290 decisively to keep the current uptrend intact. Price action on the charts suggests that the possibility is high of the stock breaching ₹290 and targeting ₹295 initially. Further break above ₹295 will take the stock up to ₹305. On the other hand, if ITC reverses lower from ₹290 , it can fall to ₹280 or ₹275 — a key short-term support. An immediate break below ₹275 looks less probable at the moment. If the stock manages to sustain above ₹275, a range-bound move between ₹275 and ₹290 can be seen in the short term. If ITC breaks below ₹275, a fall to ₹270 or ₹268 is possible. Long-term investors can hold the long positions and retain the stop-loss at ₹220.

Infosys (₹1,181)

Infosys remained subdued and closed on a mixed note last week. The 21-day moving average at ₹1,167 had provided strong support for the stock. As long as Infosys remains above this support, It can break above the crucial ₹1,200-₹1,205 resistance region. Such a break will mark the end of the prolonged sideways consolidation phase. The stock has been stuck in the band between ₹1,100 and ₹1,200 since January. A strong break and a decisive close above ₹1,205 will take the stock higher to revisit the previous highs of ₹1,278. Such a rally will also increase the possibility of the stock targeting ₹1,350 and ₹1,375 levels over the medium term. The near-term view will turn negative if the stock declines below the 21-day moving average. In such a scenario, a fall to ₹1,140 or ₹1,135 levels is possible. Further break below ₹1,135 will see the down-move extending to ₹1,100 . Both medium- and long-term investors can hold their long positions.

RIL (₹988.5)

RIL managed to reverse higher in the past week and has recovered most of the loss made in the week earlier. The stock surged 3.6 per cent last week. Though the weekly chart gives a mixed picture, the daily candles leave the near-term outlook positive. A test of the psychological resistance level of ₹1,000 is possible. A strong break above ₹1,000 will take the stock higher to ₹1,030 . Whether RIL breaks above ₹1,030 or not will decide the next move. Inability to break above ₹1,030 can pull the stock lower to ₹1,000. A break below ₹1,000, will see the down-move extending towards ₹980 or ₹970. On the other hand, if RIL manages to break above ₹1,030 decisively, it can gain fresh momentum and rally towards ₹1,085. The 21-day moving average at ₹959 is a key support. The outlook will turn negative only if RIL declines below this support. A strong break below ₹959 will then increase the possibility of the stock falling to ₹930 or even ₹900 .

Tata Steel (₹606)

Tata Steel has risen, breaking above the key psychological resistance level of ₹600 last week. This has eased the downside pressure and is also slightly turning the bias positive. The key resistance is in the ₹615-620 region is likely to be tested in the coming days. Traders who have taken short position last week on rallies at ₹590 and ₹596 can exit and book loss at current level. Whether Tata Steel breaks above ₹620 or not will be key in deciding the next move. A strong break and a decisive close above ₹620 ease the downside pressure. Such a break will take the stock higher to ₹635 or even to ₹650. This move above ₹620 could be swift on the back of short covering. On the other hand, if Tata Steel reverses lower from ₹620, it can fall to ₹600 initially. If it manages to bounce from this psychological support, a range-bound move between ₹600 and ₹620 can be seen for some time. But a break below ₹600 can drag the stock lower to ₹585.

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