Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on February 23, 2019 Published on February 23, 2019

SBI (270.7)

SBI bounced last week after plummeting over 7 per cent in the week earlier. The stock fell initially to a low of ₹258.8 and reversed sharply higher from there to close about 3 per cent up for the week. The bounce-back move in the past week is technically significant as it happened from near the 200-week moving average as well as trend-line support poised near ₹258. This leaves the near-term outlook positive. Immediate support is at ₹267. As long as SBI trades above it, there is a strong likelihood of the stock moving higher to ₹278 and ₹281. The region between ₹278 and ₹281 is a crucial short-term resistance. Inability to breach the ₹278-281 resistance zone can trigger a pull-back move to ₹270 or even lower again. But if SBI manages to breach ₹281 decisively, the downside pressure would ease. In such a scenario, the stock will gain fresh momentum and can rally to ₹295 and ₹300. It will come under pressure again only if it breaks below ₹258 decisively. The next targets are ₹254 and ₹247.

ITC (₹274.3)

ITC continued to trade within the ₹273-284 sideways range in the past week as well. The stock has been stuck in this range for about a month. The near-term outlook continues to remain mixed. The view remains the same. A breakout on either side of ₹273 or ₹284 will decide the direction of the next move. A strong break and a decisive close below ₹273 will turn the outlook to negative. Such a break will bring fresh sellers into the market and drag the stock lower to ₹264. The level of ₹264 is a strong medium-term support, which may have the potential to halt the fall. A further break below ₹264 looks less probable at the moment. On the other hand, if ITC manages to break above ₹284, it can gain fresh momentum and the downside pressure will ease. In such a scenario, ITC can test ₹289. A further break above ₹289 will then increase the likelihood of the stock targeting ₹301. Investors who have taken long positions at ₹282, ₹278 and ₹272 should remain cautious. Retain the stop-loss at ₹262.

Infosys (₹733.3)

The stock remained below ₹750 last week and fell as expected. It declined 1.1 per cent and is down for the second consecutive week. The 21-day moving average resistance at ₹744 has been capping the upside over the last one week. A dip to ₹720 looks likely in the near term. A break below ₹720 will can take the stock lower to ₹710 and ₹700. However, a further fall below ₹700 looks unlikely as cluster of supports are poised between ₹710 and ₹700. Also dips to the ₹710-700 support zone is likely to get fresh buyers coming into the market, as it makes a good buying opportunity. A strong bounce from the ₹710-700 support zone will take Infosys higher to ₹745 and ₹750. A further break above ₹750 will target ₹770 and ₹790. Traders with a medium-term perspective can make use of dips to go long at ₹720. Accumulate longs at ₹715 and ₹710. Stop-loss can be placed at ₹680 for the target of ₹790. Revise the stop-loss higher to ₹735 as soon as the stock moves up to ₹755.

RIL (₹1,232.6)

RIL remained subdued and fell for the second consecutive week. The 21-day moving average at ₹1,247 has been restricting the stock from a strong rise. As long as RIL trades below ₹1,247, there is a strong likelihood of it falling to ₹1,200. The region between ₹1,200 and ₹1,195 is a crucial support. Whether RIL breaks below ₹1,195 or not will decide the next move. If it declines decisively below ₹1,195, the downside pressure will intensify. Such a break can drag the stock initially to ₹1,175. A further break below ₹1,175 will then increase the likelihood of the fall extending to ₹1,145. On the other hand, if RIL manages to sustain above the ₹1,200-1,195 support zone and reverses higher, the downside pressure will ease. In such a scenario, the stock can move higher to ₹1,250 and ₹1,260. A strong break and a decisive close above ₹1,260 will then increase the likelihood of the stock targeting ₹1,300 and ₹1,320. Investors can hold the long positions taken at ₹1,260, ₹1,245 and ₹1,225. Retain the stop-loss at ₹1,180 for the target of ₹1,420.

Tata Steel (₹501.9)

After two weeks of indecisive move, Tata Steel rallied, breaking above the key 55-day moving average resistance last week. The stock surged over 7 per cent and has closed the week on a strong note. It indicates the beginning of the corrective rally. Near-term supports are at ₹497 and ₹488, which can limit the downside in the near term. As long as the stock trades above these supports, an up-move to ₹518 and ₹520 is likely in the near term. Inability to breach ₹520 can trigger a pull-back move to ₹500. But a strong break above ₹520 will take the stock higher to ₹545-₹550. The recent up-move from ₹442.1 made earlier this month is significant, as it has happened from the 200-week moving average support. Whether the current move is a trend reversal or just a corrective rally will become clear in the coming weeks. Short-term traders can go long at current levels and also accumulate at ₹490. Stop-loss can be placed at ₹480 for the target of ₹545. Revise the stop-loss higher to ₹510 as soon as the stock moves up to ₹517.

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