Technical Analysis

High Five: SBI, RIL, ITC, Infosys, Tata Steel

GURUMURTHY K | Updated on January 16, 2018 Published on October 16, 2016

SBI may remain range-bound

SBI (₹251.9)

The SBI stock fell 2.4 per cent last week. The 100-week moving average at ₹246 and a trendline at ₹243 are the key near-term supports. A test of these supports is possible as long as the stock trades below ₹255. If the stock manages to sustain above ₹243, which is more likely, it can remain range-bound between ₹243 and ₹260 or ₹265 in the short term. Within the range, the bias is bullish and the stock can break above ₹265. Such a break will boost the bullish momentum and take it to ₹270 initially, thereby marking the beginning of a fresh leg of upmove. Further break above ₹270 will pave the way for the next targets of ₹290 and ₹300. On the other hand, if SBI breaks below ₹243, it can fall to ₹235 or ₹233. The region between ₹235 and ₹233 is a strong support zone, which can limit the downside in the stock. So a fall to ₹235 or ₹233 will be a good buying opportunity. A reversal from this support zone can take the stock higher to ₹250 once again. Medium-term investors can hold the long positions. Accumulate long positions at ₹235 and retain the stop-loss at ₹210.

Downtrend intact for ITC

ITC (₹239.8)

After tumbling 8 per cent over the past three weeks, ITC paused last week. The stock’s movement was range-bound between ₹237 and ₹243. However, the downtrend that was in place since September is intact and there is room for a further fall. Any corrective rallies could find resistance at around ₹247. A dip to test the key support at ₹233 looks likely in the near term. A strong reversal from ₹233 can take the stock higher to ₹245 and ₹247 thereafter. In such a scenario, the stock may remain range-bound between ₹233 and ₹247 for some time. On the other hand, if ITC fails to reverse higher and breaks below ₹233, it can fall to ₹230, ₹227 or even ₹224. A series of moving average supports between ₹230 and ₹224 may slow down the pace of fall in the stock price. Whether or not it manages to bounce from the ₹230-₹224 support zone will be crucial in determining the next trend. A reversal may take it to ₹240 and ₹245 levels. But a decisive fall below ₹224 will raise the likelihood of the stock tumbling to ₹210 or ₹205 levels.

Infosys may remain under pressure

Infosys (₹1,027.4)

Infosys made a wild swing between ₹996 and ₹1,080 on Friday before closing at ₹1,027.4, up 1.4 per cent for the week. The company lowering its revenue growth guidance for 2016-17, led to sharp volatility in the stock toclose on a mixed note. The price action this week may give a clear indication of the next move. Near-term resistance is at ₹1,050. The downside pressure may ease if the stock manages to move higher from the current levels and breaks above ₹1,050. Such a break can take the stock higher to ₹1,090 or ₹1,100.

On the other hand, inability to surpass ₹1,050 may keep the stock under pressure. It can then fall to ₹1,000 or to even lower levels in the coming weeks. The next immediate target is ₹982 which is a trendline support. Further break below ₹982 can see Infosys tumbling to ₹940 or ₹913 – the 50 per cent Fibonacci retracement support level. The possibility of a reversal from around these supports at ₹940 or ₹913 cannot be ruled out. Such a reversal can take the stock higher to ₹1,000 levels once again.

RIL is range-bound and volatile

RIL (₹1,078.2)

RIL has been volatile over the last few weeks. The stock has been facing strong resistance around ₹1,125 over the past three weeks. It fell 2.9 per cent last week and has closed decisively below the 21-day moving average poised at ₹1,086. A fall to test the key support at ₹1,050 is possible this week. A reversal from ₹1,050 may increase the possibility of the stock rising to ₹1,100 and ₹1,125 once again. In such a scenario, the stock can remain range-bound between ₹1,050 and ₹1,125 for some time. Charts show a greater possibility of a volatile move between ₹1,050 and ₹1,125. A breakout on either side of ₹1,050 or ₹1,125 will then decide the next trend for RIL. If the stock breaks below ₹1,050, it can fall to ₹1,030 or ₹1,000. On the other hand, a strong break above ₹1,125 can take the stock initially to ₹1,150. Further break above ₹1,150 will see the stock targeting ₹1,190 thereafter. Investors with a medium-term perspective can go long on dips near ₹1,050 with a stop-loss at ₹990. Accumulate longs if the stock breaks below ₹1,050 and declines to ₹1,030.

Uptrend is intact for Tata Steel

Tata Steel (₹411.9)

Tata Steel extended its rally for the fourth consecutive week and closed 1.3 per cent higher last week. Immediate support is at ₹408. If Tata Steel manages to sustain above this level, a rise to ₹425 is possible in the near term. Further break above ₹425 can see the upmove extending to test the 61.8 per cent Fibonacci retracement resistance at ₹431. If the stock manages to surpass ₹431 the rally can then target ₹480 over the medium term. But a reversal from ₹431 may see a corrective fall to ₹400. On the other hand, if the stock breaks below ₹408 immediately from current levels, an interim fall to ₹395 is possible. However, the downside in the stock is likely to be capped at the strong ₹390-₹385 support zone in the short term. Fresh buying interest is likely to come into the market at lower levels. Short-term investors can retain the stop-loss at ₹380 and book profit at ₹430. Revise the stop-loss higher to ₹410 when the stock moves up to ₹425. Medium-term investors can hold the longs and retain the stop-loss at ₹310.

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