Technical Analysis

Weekly trading guide

Gurumurthy K | Updated on October 14, 2018 Published on October 14, 2018

Short-term outlook mixed for SBI

SBI (₹263.3)

SBI spiked over 8 per cent intra-week and made a high of ₹279.4. However, the stock gave back most of the gains, and closed 2 per cent higher for the week. The price action over the past couple of weeks leaves the short-term outlook mixed. Traders can stay out of the market until a clear trend emerges. Support is at ₹254 and resistance is at ₹280. SBI can remain range-bound between ₹254 and ₹280 for some time. A breakout on either side of ₹254 or ₹280 will then decide the next move. If SBI declines below ₹254 in the coming days, the downtrend that has been in place since September will continue. In such a scenario, a fall to ₹243 or ₹240 is possible. A further break below ₹240 will then increase the likelihood of the stock extending its downmove to ₹232 over the medium term. On the other hand, if SBI manages to break the range above ₹280, it can first move up to ₹284. A break above ₹284 can take it further higher to ₹290.

Resistances may cap upside in ITC

ITC (₹274.7)

ITC has closed in the red for the sixth consecutive week. The stop-losses on all the long positions we had recommended were hit in the last week’s fall. The stock tumbled 4.9 per cent intra-week to make a low of ₹263.6. Though it managed to recoup most of the loss on the final trading day, key resistances ahead may cap the upside in the short term. Immediate resistance is at ₹277 —– the 200-day moving average. If ITC manages to breach this hurdle, it can move up to ₹282. A further break above ₹282 can take it to ₹285 or ₹287. On the other hand, if it fails to break above ₹277 and reverses lower, it can first fall to ₹269. A strong break below ₹269 will increase the likelihood of the downtrend extending to ₹258 or ₹256. The region between ₹258-256 and ₹252-250 are crucial supports. A strong bounce from these support regions may signal the beginning of a fresh upmove. Such a fall to ₹256 or ₹250 could be a good buying opportunity for long-term investors.

Infosys signals trend reversal

Infosys (₹679)

Infosys tumbled 6 per cent last week, breaking below the key support level of ₹690. The sharp fall in the past week gives an initial confirmation that the uptrend that had begun in August 2017 has ended. A decisive daily close below ₹670 will see Infosys tumbling towards ₹630 over the short term. But before this sharp fall happens, an intermediate upmove to ₹700 cannot be ruled out. A cluster of resistances is poised in the broad ₹700-720 region, which are likely to cap the upside. As such, any bounce-back in the coming days could be short-lived and is likely to find fresh sellers at higher levels. Traders can go short on rallies at ₹685 and ₹695. Stop-loss can be placed at ₹725 for the target of ₹620. Revise the stop-loss lower to ₹660 as soon as the stock moves down to ₹645. The bearish outlook will get negated only if Infosys manages to decisively rise past ₹720. But such a strong move looks unlikely at the moment as the stock is ripe for a correction.

RIL likely to see corrective rally

RIL (₹1,126.4)

RIL managed to recover last week after plummeting over 16 per cent a week earlier. Though the broader trend is down, the bounce-back in the last week signals that a relief rally is likely in the near term. Immediate support is at ₹1,115. The next key supports are at ₹1,100 and ₹1,085. The stock will come under pressure only if it decisively declines below ₹1,085. In such a scenario, RIL can fall to ₹1,020 in the short term. But as long as the stock remains above ₹1,085, there is a strong likelihood of it rallying to ₹1,180 or ₹1,200 in the coming days. An inability to breach ₹1,200 can drag the stock lower to ₹1,120 and ₹1,100 again. However, if RIL manages to decisively rise past ₹1,200, the upmove can extend to ₹1,250. Short-term traders with high risk appetite can go long at current levels and also accumulate on dips at ₹1,115 and ₹1,100. Stop-loss can be placed at ₹1,080 for the target of ₹1,195. Revise the stop-loss higher to ₹1,140 as soon as the stock moves up to ₹1,155.

Tata Steel stuck in sideways range

Tata Steel (₹574.9)

Tata Steel was range-bound between ₹544 and ₹587 last week. The near-term outlook is unclear. But the price action on the daily chart leaves the bias positive. This leaves the possibility high for the stock breaking above ₹587. Such a break can take Tata Steel higher to ₹591 or ₹593. A further break above ₹593 will boost the momentum and increase the likelihood of the stock extending its rally to ₹610. A strong break and a decisive close above ₹610 is needed for the outlook to turn positive. On the other hand, if Tata Steel fails to breach ₹587 and breaks below ₹550, it can fall to ₹545 or ₹540 in the coming days. It will then keep intact the downtrend that has been in place over the past few weeks. The level of ₹540 is a crucial support. If the stock declines below this support, it will come under renewed selling pressure. In such a scenario, there is a strong likelihood of Tata Steel tumbling to ₹500 or even lower, thereafter.

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