Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on May 28, 2018 Published on May 27, 2018


SBI (267)

Contrary to expectations of a fall, SBI surged in the past week. The stock skyrocketed 12 per cent last week, triggering the stop-loss on the short positions recommended. Immediate support is at ₹263 and the next significant one is placed at ₹257. Immediate resistance is at ₹269. Inability to break this hurdle can drag the stock lower to ₹263 or ₹257. However, indicators on the chart suggest that SBI is likely to sustain above ₹257. The 21-day moving average is on the verge of crossing over the 55-day moving average — a bullish signal indicating that the downside could be limited. As such, a fall below ₹257 looks less probable. A bounce back again from ₹257 will keep the bullish outlook intact. A subsequent break above ₹269 will boost the momentum and take the stock to ₹280 or even higher in the short term. Traders can wait for dips and go long if the stock reverses higher from ₹257. Stop-loss can be placed at ₹247 for the target of ₹280. Revise the stop-loss higher to ₹265 as soon as the stock moves up to ₹271 level.

ITC (₹271.9)

Three weeks of sideways move in ITC came to an end last week. The stock broke the range below ₹276 and fell 3.6 per cent in the past week. Inability to break above ₹290 since the beginning of this month, followed by a sharp fall last week, indicates that ITC is retaining its broad ₹250-295 sideways range. The stock has been stuck inside this range since last July. A crucial support cluster is poised near current levels between ₹269 and ₹267, which is likely to be tested in the initial part of the week. An upward reversal from this support zone can trigger a relief rally to ₹276. Further break above ₹276 will increase the likelihood of the stock extending the up-move to ₹280 and ₹285. On the other hand, if ITC breaks below ₹267, the selling pressure will intensify. This break can take the stock lower to ₹264 initially. A break below ₹264 will increase the possibility of the stock tumbling towards ₹255 or even ₹250. Investors holding long positions can accumulate on dips near ₹255 while retaining the stop-loss at ₹220.

Infosys (₹1,228.8)

The prolonged struggle to breach the psychological ₹1,200 mark is over. Infosys has been fighting hard to breach this level since the beginning of this year. The stock surged 3.8 per cent last week, indicating that the uptrend that has been in place since September last year is intact. The region between ₹1,210 and ₹1,200 will now serve as a strong support. Dips to this support region are likely to see fresh buyers coming into the market. As long as Infosys remains above ₹1,200, a rally to test the previous highs of ₹1,268 is possible in the short term. A pull-back from those levels can trigger an intermediate corrective fall to ₹1,220. But an eventual break above ₹1,268 will see the current rally extending towards ₹1,350 and ₹1,370 over the medium term. Medium- and long-term investors can hold the long positions. The near-term view will turn negative if the stock breaks below ₹1,200. The ensuing target is ₹1,185. A break below ₹1,185, though unlikely, can drag the stock lower to ₹1,160 or ₹1,150 over the short term.

RIL (₹921.7)

RIL extended its fall for the second consecutive week. The stock fell 2.6 per cent intra-week to make a low of ₹909. However, it managed to bounce back slightly from this low, recovering some of the loss, and has closed 1.2 per cent lower for the week. The near-term outlook remains mixed for RIL. Immediate resistance is at ₹932. A break above it will ease the downside pressure and take the stock up to ₹960 and ₹1,000. But as long as the stock remains below ₹932, it will continue to remain under pressure. A fall to ₹900 is likely in such a scenario in the near term. A break below ₹900 will then increase the possibility of the fall extending to ₹885 or ₹880. The region between ₹885 and ₹880 is a crucial support for RIL. If it manages to bounce back from this support zone, the downside pressure will ease and a rally to ₹930 or even ₹950 is possible. In such a scenario, the broad ₹880-1,000 sideways range will remain intact. But if RIL declines below ₹880 level, it can fall to ₹850 or even lower on the back of profit-booking.

Tata Steel (₹567.2)

Tata Steel extended its fall as expected last week. The stock plummeted over 9 per cent intra-week to make a low of ₹536.6. However, it managed to reverse higher from this low, recovering some of the loss and closed the week 4.1 per cent lower. Key resistance is between ₹570 and ₹580, which can be tested in the near term. A break above ₹580 will ease the downside pressure and can take the stock higher to ₹590 and ₹600. But a pull-back from the ₹570-₹580 resistance zone will continue to keep the stock under pressure. A fall to ₹550 is possible in such a scenario. A strong break below ₹550 will see the down-move extending to ₹515 or even lower levels thereafter. The price action suggests that Tata Steel is likely to reverse lower again from the ₹570-580 resistance zone. Traders with high-risk appetite can go short at current levels and at ₹575. Stop-loss can be placed at ₹595 for the target of ₹520. Revise the stop-loss lower to ₹555 as soon as the stock moves down to ₹545.


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