Weekly Trading Guide

SBI, as expected, broke below the key support level of ₹255 last week. The sharp 4.9 per cent fall in the past week has kept the downtrend that has been in place since early September, intact. The region between ₹255 and ₹260 will now serve as a strong resistance and cap the upside. A fall to test the ₹242-₹240 support region is likely. If SBI manages to bounce from the ₹242-₹240 support zone, an upmove to ₹255 or ₹258 is possible. But a break below ₹240 will increase the likelihood of the fall extending to ₹232 or ₹230. The region around ₹230 is a crucial medium-term support. A bounce from ₹230 and a subsequent break above ₹260 will keep the broader ₹230-₹350 sideways range intact. But if SBI makes a decisive close below ₹230, the selling pressure would intensify. In such a scenario, there is a strong likelihood of the stock falling to ₹200. As such, the price action in the coming days will need a close watch to give a cue on the next move.

After sustaining at higher levels for most part of the week, ITC fell sharply on Friday, giving back all the gains. The stock was down 2.7 per cent. A key near-term support is at ₹275, which held well last week. If ITC manages to sustain above this support, an upmove to ₹285 or ₹290 is possible in the near term. Inability to breach the resistance level of ₹290 can pull the stock lower again. In such a scenario, a range-bound move between ₹275 and ₹290 can be seen for some time. But if ITC breaks above ₹290, the downside pressure will ease. Such a break will then take the stock up to ₹298 and ₹300. On the other hand, if ITC breaks below the support level of ₹275, it can initially fall to ₹270. A further decisive break below ₹270 will increase the likelihood of the fall extending to ₹260 or ₹255 over the medium term. Traders can hold the long positions at ₹283 and ₹280. Retain the stop-loss at ₹273. Revise the stop-loss higher to ₹285 as soon as the stock moves up to ₹289.

Infosys plummeted over 7 per cent last week, breaking below the crucial support level of ₹670. The sharp fall below ₹670 confirms the trend reversal, which we have been cautioning in this column over the last few weeks. The stock currently hovers above a key ₹630-₹625 support zone. If it manages to sustain above it, a corrective rally to ₹670 or ₹680 is possible. However, the overall downtrend will remain intact and fresh sellers are likely to emerge at higher levels. As such, a further rally beyond ₹680 looks unlikely. An eventual break below ₹625 will then increase the likelihood of the stock extending its downmove to ₹600 and ₹590 in the coming weeks. Traders can hold the short positions taken at ₹685 and ₹695. Revise the stop-loss lower to ₹640 for the target of ₹620. Move the stop-loss lower to ₹630 as soon as the stock moves to ₹625. Also, fresh short positions can be initiated on rallies at ₹670 and ₹675. Stop-loss can be placed at ₹710 for the target of ₹600.

RIL fell for the second consecutive week. The stock tumbled over 5 per cent in the past week, breaking below the crucial support level of ₹1,050. The bias remains negative on the charts. The 21-day moving average is on the verge of crossing below the 100-day moving average. This is a negative indicator signalling that the upside could be limited. Near-term resistance is at ₹1,085. The next significant resistance is in the ₹1,125-₹1,130 region. The downside pressure will ease only if RIL manages to surpass ₹1,130 decisively. But such a strong upmove looks less probable. As long as the stock traders below ₹1,085, there is a strong likelihood of it testing the psychological support level of ₹1,000. A break below ₹1,000 can take RIL lower to ₹980 or ₹975. Short-term traders with a high-risk appetite can go short on rallies at ₹1,075 and ₹1,085. Stop-loss can be placed at ₹1,125 for the target of ₹980. Revise the stop-loss lower to ₹1,060 as soon as the stock falls to ₹1,020.

Tata Steel fell over 3 per cent intra-week and made a low of ₹535.3. However, it managed to claw-back from the lows, recovering most of the loss, and has closed on a flat note for the week. The near-term outlook is mixed. Immediate resistance is at ₹560. A break above it can take the stock initially higher to ₹570. A further break above ₹570 will increase the likelihood of the upmove extending to ₹585 or ₹590. On the other hand, if Tata Steel fails to breach ₹570, it can reverse lower towards ₹540 and ₹535 again. In such a scenario, a range-bound move between ₹535 and ₹570 is possible for some time. The stock will come under renewed pressure on a strong break below ₹535. Such a break can drag it lower initially to ₹500. A further break below ₹500 will then target ₹480 and ₹470 over the medium term. Traders can hold the short positions taken at ₹553. Accumulate more shorts at ₹560 and ₹570. Retain the stop-loss at ₹590 for the target of ₹500.

Gurumurthy K

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