Technical Analysis

Weekly trading guide

Gurumurthy K | Updated on January 19, 2019 Published on January 19, 2019

SBI (295.2)

After inching higher for five consecutive weeks, SBI reversed lower last week. The stock made an intra-week high of ₹306.4 and came-off from there, giving back the gains, and closed 2.4 per cent lower for the week. A key near-term support is at ₹293. Whether SBI breaks below it or not will decide the direction of the next move. If SBI declines decisively below ₹293, it can fall initially to ₹290. A further break below ₹290 will bring renewed pressure on the stock. Such a break will then increase the likelihood of the stock falling towards ₹285 and ₹280 over the short term. On the other hand, if SBI manages to bounce from ₹293, an upmove to revisit the ₹305-₹307 resistance zone is possible. A break above ₹307 can target ₹310 and ₹312 thereafter. A further break above ₹312 will then increase the likelihood of the stock testing the crucial ₹320-₹322 long-term resistance zone. As being reiterated in this column over the last few weeks, the price action around the ₹320-₹322 resistance region will need a close watch which would give a cue on the next trend.

ITC (₹290.0)

After surging over 5 per cent, ITC fell last week. The stock was down 1.8 per cent for the week. Immediate supports are at ₹287.5 and then in the ₹286-₹285 region. Though a dip in the near-term to test these supports cannot be ruled out, the downside is likely to be limited. The stock will come under pressure only if it declines below ₹285 decisively. But a fall below ₹285 looks unlikely at the moment as fresh buyers are likely to emerge at lower levels. A bounce from the ₹286-285 support zone can trigger a fresh rally toward ₹297 and ₹301 — key short-term resistance levels. Inability to breach ₹301 can pull the stock lower to ₹295 or ₹290. But the overall outlook remains positive. As such, an eventual break above ₹301 will see the stock rallying towards ₹308 and ₹310 in the coming weeks. A further break above ₹310 will then increase the likelihood of the stock extending its up-move towards ₹320 and ₹325 over the medium term. Investors who have taken long positions at ₹282 and ₹278 can hold it. Retain the stop-loss at ₹262.

Infosys (₹731)

Infosys opened with a wide gap-up and witnessed a strong rally last week. The stock was up 7 per cent for the week. It surged breaking above the psychological level of ₹700 and has closed on a strong note. The strong rally above ₹700 last week indicates that the downtrend that was in place since October has ended. Near-term support is at ₹720. Also, there is an inverted head and shoulder pattern visible on the daily chart. This is a bullish reversal pattern. The neckline support is around ₹700, which is likely to limit the downside in the short term. A revisit of ₹750 levels is likely in the near term. Inability to breach ₹750 can trigger an intermediate pull-back move to ₹720 or lower. But a strong break above ₹750 will boost the momentum. Such a break will then increase the possibility of the stock targeting ₹800 and ₹810. Traders with a medium-term perspective can buy on dips at ₹722, ₹715 and ₹710. Stop-loss can be placed at ₹678 for the target of ₹805. Revise the stop-loss higher to ₹735 as soon as the stock moves up to ₹765.

RIL (₹1,182.9)

RIL surged about 8 per cent last week. The strong up-move has taken the stock well above the key resistance level of ₹1,050. The immediate resistance in the ₹1,200-1,210 zone is likely to be tested in the near term. Inability to breach this hurdle can trigger a pull-back move to ₹1,150 or ₹1,140. The outlook will turn negative only if RIL declines below ₹1,140. The next target is ₹1,100. But such a fall below ₹1,140 looks less probable at the moment as fresh buyers may emerge at lower levels. A range-bound move between ₹1,140 and ₹1,200 can be seen for some time. An eventual break above ₹1,210 will then increase the likelihood of the stock rallying towards ₹1,250. Such a rally will boost the momentum and keep the bias positive from a medium-term perspective. It will also increase the possibility of the stock revisiting ₹1,300 and ₹1,350 levels. Medium-term investors can hold the long positions taken at ₹1,125 and ₹1,095 with a revised stop-loss at ₹1,135. Move the stop-loss further higher to ₹1,185 as soon as RIL moves up to ₹1,205. Book profits at ₹1,245.

Tata Steel (₹470.5)

Tata Steel inched lower to close in red for the fourth consecutive week. The stock was down 0.8 per cent. The pace of fall seems to be slowing down as the stock is heading towards the crucial long-term support zone of ₹460-430. The stock can continue to remain subdued. A dip to test the ₹460-430 support zone cannot be ruled in the short term. The price action in the coming weeks will need a close watch. As mentioned last week, whether Tata Steel manages to bounce from the ₹460-430 support zone or not will be key in deciding the direction of the next move. A bounce from this support zone can trigger a corrective rally initially to ₹480 and ₹485. A further break above ₹485 will see the relief rally extending towards ₹500 or even ₹525. On the other hand, a fall below ₹430 will see the stock declining towards ₹410 and ₹400. Such a fall will be bearish from a long-term perspective. It will then increase the possibility of the stock tumbling further to revisit ₹300 levels over the long term.

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