Technical Analysis

Weekly trading guide

Gurumurthy K | Updated on April 07, 2019 Published on April 07, 2019

Supports may limit the downside in SBI (₹317)

SBI surged, breaking above the key resistance level of ₹321, but failed to sustain higher. The stock made a high of ₹332.65 and fell sharply, giving back all the gains. Cluster of supports are poised in the broad ₹316-312 region. Whether SBI breaks below the ₹316-312 support zone or not will decide the direction of the next move. A strong break below ₹312 can trigger a corrective fall initially to ₹305 on profit-booking. A further break below ₹305 will see the fall extending to ₹300 or even ₹290 thereafter. On the other hand, if SBI manage to bounce back from the ₹316-312 support zone, an upmove to ₹320 and ₹325 is possible in the near term. It will keep the overall uptrend intact. A decisive weekly close is needed for SBI to gain fresh momentum target ₹350 over the medium term. Traders can hold the long positions taken at ₹315 and can accumulate at ₹308. Retain the stop-loss at ₹295 for the target of ₹350. Revise the stop-loss to ₹325 as soon as the stock moves up to ₹335.

Bias is turning negative for ITC (₹294.6)

ITC was stuck in a narrow range between ₹292 and ₹300 last week. Though the weekly charts indicates a possible range-bound move between ₹290 and ₹303, the bias on the daily chart is slightly negative. ITC can come under pressure if it declines decisively below ₹290. Such a break can trigger a fall to ₹285 or ₹283 on profit-booking. Such a fall will keep intact the channel movement which has been in place since mid-September last year. As such, a fall below ₹290 will increase the possibility of the stock revisiting ₹275 levels. But if ITC sustains above ₹290, a range-bound move between ₹290 and ₹303 can continue . A strong break and a decisive close above ₹303 is needed for ITC to gain fresh momentum. Such a break will increase the likelihood of the stock targeting ₹310 and ₹315 levels. Investors holding long positions at ₹282, ₹278 and ₹272 should remain cautious. Retain the stop-loss at ₹289. Move the stop-loss higher to ₹301 as soon as the stock moves up to ₹305. Book profits at ₹310.

Uptrend is intact in Infosys (₹756.2)

Infosys’ bullish view is intact. The stock surged about 2 per cent last week and is getting support around ₹745. This support level is likely to limit the downside in the near term. Next key support is in the ₹735-730 region. The outlook will turn negative only if Infosys declines below ₹730. The next targets are ₹710 and ₹700. But such a fall looks unlikely at the moment. As such, Infosys can extend the current up-move to ₹780 and ₹785 in the coming days. The region between ₹780 and ₹785 is a crucial medium-term resistance. Whether the stock rises past ₹785 or not will decide the next direction of move. A pull-back from the ₹780-785 resistance zone can trigger a corrective fall to ₹760. But a strong break above ₹785 will then pave way for a fresh rally to ₹800 and even higher levels thereafter. Medium-term traders can hold the long positions taken at ₹725, ₹720 and ₹715 with a revised stop-loss at ₹735. Move the stop-loss further higher to ₹765 as soon as the stock moves up to ₹775. Book profits at ₹785 level.

Resistance caps the upside in RIL (₹1,355.1)

RIL surged over 3 per cent intraweek but failed to sustain higher. The stock made a high of ₹1,406.5 and reversed sharply lower, giving back all the gains. RIL closed the week marginally lower by 0.6 per cent. The psychological resistance level of ₹1,400 has capped the upside in the stock. Immediate support is at ₹1,345 — the 21-day moving average. If RIL manages to bounce from this support, an up-move to ₹1,400 can be seen. In such a scenario, a range-bound move between ₹1,345 and ₹1,400 is possible for some time. A strong break and a decisive close above ₹1,400 is needed for the stock to gain fresh momentum. Such a break will increase the likelihood of the stock targeting ₹1,450 and ₹1,500 over the long term. On the other hand, if RIL declines below ₹1,345 it can come under pressure. Such a break can drag RIL lower on profit-booking to ₹1,315. The region between ₹1,315 and ₹1,300 is a key support for RIL. The outlook will turn negative only if RIL breaks below ₹1,300, which is unlikely at the moment.

Crucial resistance ahead for Tata Steel (₹548.3)

The sideways consolidation between ₹505 and ₹532 that was in place over the past four weeks, ended last week. Tata Steel surged, breaking the range above ₹532 and closed 5.3 per cent higher for the week. A key long-term trend line resistance is at ₹557, which can be tested in the near term. Whether Tata Steel breaks above this key hurdle or not will decide the next move. A strong break above ₹557 can take it initially higher to ₹578. A further break above ₹578 will increase the likelihood of the stock targeting ₹600 and ₹635. Such a rally will mark the end of the downtrend that has been in place since late January 2018. But if Tata Steel reverses lower from ₹557, it can fall to ₹535 or ₹525. Traders can hold the long positions at ₹518 and ₹512 with a revised stop-loss at ₹515. Move the stop-loss up to ₹545 as soon as the stock moves to ₹552. Book profits at ₹555.

 

The writer is a Chief Research Analyst at Kshitij Consultancy Services

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