Weekly Trading Guide

Downtrend is intact in SBI (₹248.1)

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.

ITC hovers above a key support (₹280.6)

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 confirms a trend reversal (₹633.5)

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.

Resistances can cap the upside in RIL (₹1,044.7)

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.

Near-term outlook is unclear in Tata Steel (₹551.1)

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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