Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on May 25, 2019 Published on May 25, 2019

SBI (₹354.6)

SBI opened with a wide gap-up and surged 11 per cent last week, breaking above the key resistance level of ₹335. A key long-term resistance is at ₹362, which is holding for now. The stock can revisit this hurdle in the near term. A strong break and a decisive close above ₹362 will boost the momentum and take SBI up to ₹390 and ₹395 in the short term. But a pull-back from ₹362 can drag it lower to ₹345 and ₹335. In such a scenario, a sideways move between ₹335 and ₹362 can be seen for some time. As long as the stock remains above ₹335, the bias will be bullish for it to breach ₹362 and rally to ₹390-395. Only a break below ₹335 will turn the outlook to negative. In that case, there is a strong likelihood of the stock filling the gap formed last week. A break below ₹335 can drag it lower to ₹325 and ₹320. A further fall below ₹320 looks less probable as fresh buyers are likely to emerge at lower levels and limit the downside.

ITC (₹290.15)

ITC was volatile last week. It surged about 3 per cent after the outcome of the exit polls. But the stock witnessed a strong sell-off after the election results and gave-off all the gains made during the week. Technically, the resistance at ₹310 is continuing to hold well. A key support is near the current levels at ₹287. A bounce to ₹297 in the near term cannot be ruled out. But ITC has to rise past ₹297 to ease the downside pressure, which looks less probable. The bias on the chart is negative and ITC looks vulnerable to break below ₹287 and decline to ₹280 and ₹275. The region between ₹280 and ₹275 is a strong long-termsupport, which can halt the fall. A decisive bounce from this support zone will signal the beginning of a fresh leg of a long-term uptrend. Such an upward reversal from the ₹280-275 support region will have the potential to take ITC higher to ₹330-₹335 over the long term. As such, a fall to ₹280 or ₹275 will be a good opportunity to buy this stock from a long-term perspective.

Infosys (₹709.45)

Infosys fell 2 per cent last week. The stock has been struggling to rise past the 21-week moving average resistance at ₹727.85 over the last few weeks. This signals lack of strength and increases the possibility of the stock breaking below the crucial support level of ₹700. A break below ₹700 can take it lower to ₹690-688. A bounce from ₹688 can trigger a corrective rally to ₹710 and ₹715. But the upside could be capped. An eventual break below ₹688 will then increase the likelihood of the stock extending its down-move to ₹675 and ₹670. The region around ₹670 is a crucial long-term support for the stock. As such, the price action around this support will need a close watch to get a cue on the next move. A break below ₹670 seems unlikely. This will see the stock tumbling to ₹650-640 or even lower levels over the medium term. On the other hand, an upward reversal from ₹670 will ease the downside pressure. In such a scenario, Infosys can bounce-back to ₹700 and ₹715 levels.

RIL (₹1,336.8)

RIL opened with a wide gap-up and surged 10 per cent intra-week. However, the stock reversed lower from its high of ₹1,392 giving back some of the gains and closed 5.6 per cent higher for the week. The surge above ₹1,300 has now negated the chances of the expected fall to ₹1,200. As long as the stock sustains above ₹1,300, the outlook will be positive to see a rally to ₹1,400 and ₹1,430 in the short term. However, a strong rise past ₹1,430 is needed for RIL to gain fresh momentum and rally to new highs. The targets above ₹1,430 are ₹1,485 and ₹1,500. Inability to breach ₹1,430 can drag the stock lower to ₹1,350 and ₹1,300 levels once again. In such a scenario, RIL can remain range-bound between ₹1,300 and ₹1,430. A breakout on either side of ₹1,300 or ₹1,430 will then determine the next move. The stock will come under pressure if it declines below ₹1,300. In such a scenario it can fall to ₹1,280 and ₹1,250. It will also bring back the bearish outlook for the stock to test ₹1,200.

Tata Steel (₹483.5)

Tata Steel has been range-bounce between ₹455 and ₹495 over the last couple of weeks. The 200-week moving average support at ₹458 has been continuing to hold well. While the stock remains above this support, a corrective rally to ₹500-510 is possible in the near term. But a rally beyond ₹510 is unlikely as the indicators on the chart remains bearish. The 21-day moving average has crossed below the 100-day moving average. This is a negative signal, indicating that the upside could be limited. As such ,Tata Steel is likely to reverse lower from the ₹500-510 resistance region and fall to test the crucial support level of ₹445. A strong break below ₹445 can drag it to ₹425. It will also keep the overall downtrend intact. A further break below ₹425 will then increase the likelihood of the stock tumbling to ₹400 over the medium term. The ₹400 is a crucial support.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

 

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