Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on June 01, 2019 Published on June 01, 2019

SBI (₹352.5)

The resistance at ₹362 has been holding well for SBI. The stock made a high of ₹362.2 and has come-off in the past week. A strong break and a decisive close above ₹362 are needed for SBI to gain fresh momentum and resume the uptrend. Such a break will take the stock higher to ₹390 and ₹395 in the short term. But as long as SBI trades below ₹362, there is a strong likelihood of it seeing a corrective fall to ₹335. A break below ₹350 will trigger this fall. However, a bounce from ₹335 can trigger an up-move to ₹350 and ₹355. A break below ₹335 will then increase the likelihood of the fall extending to ₹328 and even ₹320. The region around ₹320 is a strong long-term resistance-turned-support for the stock. As such, a further fall below ₹320 is less likely. Fresh buyers are likely to emerge around ₹320 and limit the downside. The moving average indicators on the charts are also bullish, suggesting that the downside could be limited. So a fall to ₹320 will be a good buying opportunity from a medium-term perspective.

ITC (₹278.6)

ITC tumbled for the second consecutive week. The stock was down 3.9 per cent last week and has plummeted over 7 per cent in the last two weeks. ITC is now poised in the crucial ₹280-275 long-term support region. A break below ₹275 will drag the stock lower to ₹260 and ₹255. However, the presence of the 100-week moving average and a couple of long-term trend lines makes this ₹280-275 region a strong support. Indeed the 100-week moving average (currently at ₹275) has been limiting the downside over the last three years consistently. So a break below ₹275 looks less probable. But a strong bounce from the ₹280-275 support zone will signal the beginning of a new leg of an uptrend, which can take ITC higher to ₹300 and ₹310 levels again. But this bounce-back move could happen at a slow pace because of the steep fall seen over the last two weeks. An eventual break above ₹310 will then increase the likelihood of the stock targeting ₹330 and ₹345 over the long term. As such, investors with a long-term perspective can consider buying ITC at current levels.

Infosys (₹736.8)

Contrary to an expectation, Infosys rose last week. The stock surged 3.8 per cent per cent. Technically, it is sustaining above the psychological level of ₹700 and is keeping the broader ₹695-775 sideways range intact. The stock has been stuck in this range since the second week of January this year. An immediate support is in the ₹730-725 region, which can limit the downside in the near term. Intermediate dips to this support region are likely to see fresh buyers coming into the market. As long as the stock trades above ₹725, there is a strong likelihood of it moving up to ₹750 and ₹755 in the near term. An intermediate pull-back to ₹740 from ₹755 cannot be ruled out. Thereafter, a break below ₹740 can drag the stock lower to ₹715-710. But such a fall looks less likely. As such, an eventual break above ₹755 will then increase the likelihood of the stock targeting ₹775 — the upper end of the range over the short term. Whether Infosys manages to surpass ₹775 or not will decide the next move.

RIL (₹1,329.7)

RIL sustained above the psychological level of ₹1,300 last week. The stock was stuck in a narrow range. The price action indicates lack of strength in the stock. However, as long as RIL sustains above ₹1,300, the outlook will remain positive. An immediate resistance is at ₹1,345. A strong break above this hurdle can boost the momentum. Such a break can take the stock higher to ₹1,400 and ₹1,430 in the short term. However, as mentioned last week, RIL has to rise past ₹1,430 decisively to gain fresh bullish momentum and surge to fresh highs. The targets above ₹1,430 are ₹1,485 and ₹1,500. But a pull-back from ₹1,430 can trigger a corrective fall to ₹1,350 and ₹1,300 levels again. In that case, a range-bound move between ₹1,300 and ₹1,430 is possible for some time. The outlook will turn negative for the stock only if it declines below ₹1,300. In such a scenario, RIL can target ₹1,280 and ₹1,250 on the downside. Such a fall will also increase the likelihood of the stock declining towards 1,200 over the medium term.

Tata Steel (₹487.9)

Tata Steel began the week on a strong note and surged over 7 per cent. However, it failed to sustain higher and has come-off sharply from the high of ₹518.1, giving back almost all the gains. The stock has to sustain above the immediate support level of ₹480 to reverse higher again. A bounce from ₹480 can take Tata Steel higher to ₹510 and ₹515 levels again. A strong break above ₹515 is needed to ease the downside pressure. Such a break can take the stock higher to ₹530. A rise past ₹530 will then increase the likelihood of the upmove extending to ₹560. On the other hand, if Tata Steel declines below ₹480, the downside pressure could increase. In such a scenario, the stock can fall to test the crucial support levels of ₹460 and ₹445. The price action around these supports will need a close watch as a break below ₹445 can see the stock tumbling towards ₹410 and ₹400.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

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