Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on March 01, 2018 Published on February 25, 2018

Resistances to cap the upside in SBI  (₹276.1)



SBI tumbled over 5 per cent intraday on Monday but managed to claw back sharply from the low of ₹256.6, recovering all the loss and close 1.6 per cent higher for the week. Immediate resistance is at ₹281, which is likely to be tested in the near term. If SBI manages to rise past ₹281, the up-move can extend towards the ₹292-₹295 resistance region.




Further rally breaking above ₹295 is unlikely. The 21-day moving average has crossed below the 200-day moving average — a negative sign, indicating that the overall downtrend is intact and the upside could be capped. As such, a downward reversal is likely, either immediately from ₹281 itself or after testing the ₹292-₹295 resistance region. Such a pull-back move can take SBI lower to ₹272-₹270. Further break below ₹270 will then increase the likelihood of the stock tumbling towards ₹260 or even ₹255. Traders can wait for rallies and go short at ₹285 and ₹290. Stop-loss can be placed at ₹301 for the target of ₹255. Revise the stop-loss lower to ₹280 as soon as the stock moves down to ₹273.

Near-term view is positive for ITC (₹269)

The stock of ITC fell, breaking below the support at ₹265 to test the next at ₹262 last week, as expected. However, the stock has bounced back again after making a low of ₹262.1. Support is at ₹265, which can limit the downside in the near term. The current bounce back move is likely to extend towards ₹272 or ₹275. If ITC manages to rise past ₹275 decisively, it will pave way for the next targets of ₹285 and ₹290 in the ensuing week. But a pull back from ₹272 or ₹275 can drag the stock lower to ₹265 or even ₹262 again. In such a scenario, ITC can remain range-bound between ₹260 and ₹275 with a positive bias. The region between ₹260 and ₹257 is a key support zone. The outlook will turn negative only if the stock breaks below ₹257. Such a break, though less probable, can drag the stock lower to ₹250. As such, dips to ₹260 if seen will be a good opportunity for long-term investors to buy this stock. Investors can hold the long positions and accumulate at ₹260 levels. Retain with a long-term stop-loss placed at ₹220.

Bullish outlook is intact for Infosys (₹1,155.6)

Infosys has risen, breaking above the 21-day moving average at ₹1,139 and has closed 2.7 per cent higher for the week. The bounce back over the last two weeks reflects the inherent strength in the stock. The support is between ₹1,139 and ₹1,135. The outlook will remain bullish and a rally to ₹1,190 or even ₹1,200 is likely as long as the stock remains above ₹1,135. Whether Infosys breaks above ₹1,200 or not will then determine the next move. Inability to breach ₹1,200 can drag it lower towards ₹1,100. In such a scenario, a range-bound move between ₹1,100 and ₹1,200 can be seen for some time. But if Infosys breaks above ₹1,200 decisively, it will gain fresh momentum to target ₹1,300 or even higher over a medium to long-term. Indicators on the charts are bullish. The 21-week moving average has crossed over the 100- and 200-week moving average. This is a bullish sign, indicating that the overall uptrend is intact and the downside could be limited. Both long and medium-term investors can hold the long positions.

Short-term view is bullish for RIL (₹934)

RIL inched up and closed 1.3 per cent higher last week. Two consecutive weeks of positive close have eased the downside pressure. Also, the price action over the last three weeks suggests that the broad sideways range between ₹870 and ₹990 within which the stock has been trading since last November, is intact. Cluster of supports are poised between ₹930 and ₹920. Dips to this support zone may find fresh buyers coming into the market and limit the downside. Immediate outlook is bullish. A rise to ₹960 is likely in the coming days. A strong break above ₹960 will increase the likelihood of the stock targeting ₹980 and ₹990 thereafter. But a pull-back from ₹960 can drag the stock lower to ₹920 or even lower thereafter. Short-term traders with high-risk appetite can go long on dips at ₹930 and ₹920. Stop-loss can be placed at ₹905 for the target of ₹960. Revise the stop-loss higher to ₹935 as soon as the stock moves higher to ₹943. Move the stop-loss further higher to ₹945 as soon as the stock moves up to ₹950.

Outlook is unclear for Tata Steel  (₹677.8)

It was a volatile week for Tata Steel. The stock tumbled to a low of ₹633 and managed to reverse sharply higher on the final trading day, recovering most of the loss made during the week. Near-term view is unclear. Immediate support is at ₹670. As long as the stock sustains above this support, a rise to test the resistance at ₹693 is possible. If the stock manages to rise past ₹693, the downside pressure will ease. In such a scenario, the up-move can extend towards ₹710 or even ₹720. Broadly, Tata Steel can remain in a sideways range between ₹630 and ₹750 for a few weeks. A breakout on either side of ₹630 or ₹750 will then determine the next trend. Price action since the beginning of this month suggests that the stock is getting strong buying interest at lower levels between ₹650 and ₹630. This leaves the bias bullish for Tata Steel to breach ₹750 and surge towards ₹850 and ₹900 from a medium to long-term perspective. Investors can hold the long positions and retain the stop-loss at ₹630.

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