Weekly trading guide

SBI is range-bound with bearish bias (₹260.8)

SBI continued to trade in a sideways range between ₹255 and ₹280 for the third consecutive week. Though the near-term outlook remains mixed, the price action on the charts leaves the bias negative. The long wicks on the weekly candle chart indicate that the stock is getting strong sellers above ₹270. This increases the possibility of the stock breaking below the key support level of ₹255 in the coming days. Such a break can drag the stock lower to ₹244 or ₹242 in the short term. A further break below ₹242 will then increase the likelihood of the fall extending to ₹233 thereafter. The downside pressure will ease if SBI manages to breach ₹280. The next target is ₹285. However, the outlook will turn positive only if the stock decisively breaks above ₹285. But such a strong move looks less probable at the moment. Traders can wait for a bounce and go short at ₹272 and ₹277. Stop-loss can be placed at ₹291 for the target of ₹235. Revise the stop-loss lower to ₹265 as soon as the stock moves down to ₹257.

Supports may limit downside in ITC (₹288.4)

 

ITC has broken its six week fall. The stock surged 5 per cent last week breaking above the 200-day moving average resistance and closed on a strong note. Immediate support is in between ₹286 and ₹285. The next significant support is in the ₹282-278 zone. A fall below ₹278 looks less probable, as dips to these supports are likely to find fresh buyers. ITC can move further higher to ₹298 or ₹300 in the coming days. Whether it manages to breach ₹300 or not will decide the next move. An inability to break above ₹300 can trigger a pull-back move to ₹285 or ₹280. But a strong break and a decisive close above ₹300 will boost the momentum. Such a break can take the stock initially to ₹307 and ₹310. A further break above ₹300 will then increase the likelihood of the stock targeting ₹320 over the medium term. Short-term traders with high risk appetite can make use of dips to go long at ₹283 and ₹280. Stop-loss can be placed at ₹273 for the target of ₹298. Revise the stop-loss higher to ₹287 as soon as the stock moves up to ₹292.

Outlook bearish for Infosys (₹682.6)

 

Infosys surged over 5 per cent intra-week, but failed to sustain higher. The stock made a high of ₹721 and fell sharply on Friday, giving up most of the gains. The ₹700-₹720 resistance zone mentioned last week has held very well as expected. This leaves the bearish outlook intact. Immediate support is in the ₹680-678 region. A decisive daily close below ₹678 will increase the likelihood of the stock declining below the key support level of ₹670. A strong break below ₹670 will confirm the trend reversal and will drag Infosys lower to ₹630 or ₹625 over the short term. A further break below ₹625 will then increase the likelihood of the downmove extending to ₹600 and ₹590 thereafter. Traders can hold the short positions taken at ₹685 and ₹695. Retain the stop-loss 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 the stock manages to decisively rise past ₹720. But such a strong move looks unlikely at the moment.

Near-term resistance ahead for RIL (₹1,101.6)

 

RIL extended its corrective rally, as expected last week. The stock surged over 7 per cent to make a high of ₹1,181. But the wide gap-down on Friday and a fall thereafter wiped out all the gains made during the week, and RIL closed 2 per cent lower for the week. The 100-day moving average resistance is at ₹1,115. Whether RIL manages to rise past this hurdle or not will decide the next move. If the stock decisively breaks above ₹1,115, an upmove to ₹1,170 or ₹1,180 can be seen. The upside is expected to be limited to ₹1,200. A rally beyond ₹1,200 looks less probable at the moment. On the other hand, as long as RIL remains below ₹1,115, the outlook will remain negative. A fall to ₹1,085 is likely in the near term. A break below ₹1,085 can then drag RIL lower to ₹1,050 — a crucial trend line support level. If it manages to bounce from ₹1,050, a relief rally to ₹1,100 or ₹1,120 is possible. But a decisive break below ₹1,050 will increase the likelihood of the stock extending its fall to ₹1,024 — the 200-day moving average — or ₹1,000 thereafter.

Outlook negative for Tata Steel (₹553.6)

Tata Steel continues to face resistance in the ₹585-587 region. The stock touched a high of ₹584 in the initial part of the week, but fell sharply later, giving back all the gains, It closed 3.7 per cent lower for the week. Though the weekly chart indicates a range-bound move between ₹545 and ₹587, the bias on the daily chart is bearish. The indicators on charts are also negative. The 21-day moving average is on the verge of crossing below the 55-day moving average. This is a negative sign indicating that the upside could be limited. A fall to ₹545 and ₹540 looks likely in the near term. If Tata Steel manages to bounce from ₹540, an upmove to ₹550 or ₹555 is likely. But a strong break below ₹540 will increase the likelihood of the stock tumbling to ₹500 in the coming weeks. Traders with high risk appetite can go short at current levels and also on rallies at ₹570 and ₹583. Keep the stop-loss at ₹590 for the target of ₹500. Revise the stop-loss lower to ₹545 as soon as the stock moves down to ₹535.

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