Technical Analysis

Weekly Trading Guide

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

SBI gains bullish momentum (₹318.9)

SBI surged 3.5 per cent last week, when the crucial resistance level of ₹322 was tested. Whether the stock manages to breach this hurdle this week or not will decide the next move. A strong break and a decisive close above ₹322 will boost the bullish momentum. Such a break will take SBI higher to ₹332-₹335 in the near term. An inability to breach ₹335 can trigger a pull-back move to ₹325-320. But if SBI breaches ₹335 decisively, the current up-move will have the potential to extend up to ₹350-360 over the medium term. On the other hand, if SBI fails to move past ₹322 in the coming days and reverses lower, a fall to ₹315 or ₹312 is possible. However, the indicators on the charts are positive. As such, the possibility is high of SBI surging above ₹335 and moving to ₹350-360 in the coming weeks. Short-term traders can go long on dips at ₹315 and ₹312. Stop-loss can be placed at ₹303 for a target of ₹334. Revise the stop-loss higher to ₹318 as soon as the stock moves up to ₹324.

Key resistance ahead for ITC (₹301.4)

ITC tumbled over 3 per cent initially last week, but clawed back from the low of ₹288, recovering all the loss. The support in the ₹287-288 region has held well. Resistance exists near current levels, in the ₹302-303 region. A strong break above ₹303 will take ITC higher to ₹310. The level of ₹310 is a key short-term support. A strong break and a decisive close above this level is needed for ITC to gain fresh momentum. Such a break above ₹310 will take ITC higher initially to ₹325 in the short term. A further break above ₹325 will then increase the likelihood of the stock extending its up-move to ₹340 over the medium term. But as long as ITC remains below ₹310, there is a strong likelihood of the stock declining to ₹290-₹288 again. In that case, ITC will remain vulnerable at levels of ₹280-278 in the coming weeks. However, as mentioned last week, a fall to ₹280-₹278 will be a good buying opportunity from a long-term perspective. Investors can take long positions at ₹285 and accumulate at ₹282 and ₹278.

Infosys hovers above crucial support (₹723.8)

Infosys fell to a low of ₹704 and bounced sharply from there. But the pull-back on Friday from the high of ₹736.75 indicates lack of strength in the stock. So it needs to be seen if the stock will move up and gain strength in the coming days. The level of ₹730 will be a key intermediate resistance. A strong rise past this hurdle will take Infosys higher to ₹750-760. It will also increase the possibility of the stock testing the upper end of its ₹700-775 range in the future. But if Infosys remains subdued below ₹730 in the coming days, it can dip initially to ₹712. A break below ₹712 can drag it to the crucial level of ₹705. A break below ₹705 will increase the likelihood of the stock breaking the range and falling below ₹700. The immediate targets below ₹700 are ₹690 and ₹685. A further break below ₹685 will then see the stock tumbling towards ₹670-665. However, as mentioned last week, a decisive bounce from ₹670-665 could be good buying opportunity from a long-term perspective.

RIL can reverse to lower levels (₹1,265.7)

RIL remained stable last week after having tumbled over 11 per cent in the week earlier. Though there is a possibility of a rise to ₹1,300-1,315, a strong rise past ₹1,315 looks less probable. The price action last week indicates lack of strength. As such, RIL can reverse lower again either from the current levels or after an intermediate rise to ₹1,300-1,315. This will keep the current downtrend intact and see RIL falling towards ₹1,200-1,180 in the coming weeks. However, , the region around ₹1,180 is a strong long-term trend support, which can halt the fall. A strong upward reversal will be a bullish move from a long-term perspective; this will have the potential to take RIL back to ₹1,300 and even higher levels. As such, investors can start buying RIL at ₹1,200 and accumulate at ₹1,295 and ₹1,285. But there is a possibility of a prolonged sideways move between ₹1,180 and ₹1,300, which could delay the rally to fresh highs. So investors buying around ₹1,200 have to remain patient by holding the stock for the long term.

Corrective rally possible in Tata Steel (₹469.5)

Tata Steel extended its fall for the second consecutive week. The stock was down 3.6 per cent. It fell 7 per cent intra-week to make a low of ₹455.5, but recovered from there. The support at ₹455—the 200-week moving average—is holding well. As long as the stock trades above this support, there is a strong likelihood of it seeing a corrective rally to ₹510 in the short term. However, the upside is likely to be capped at ₹510 and the downtrend is likely to resume again as fresh sellers can come at higher levels. A pull-back from ₹510 can drag Tata steel lower to ₹455 or ₹445 again. A further fall below ₹445 will then increase the likelihood of the down-move extending to ₹425 and ₹400 over the medium term. Traders with a short-term perspective can make use of rallies to go short at ₹498 and ₹505. Stop-loss can be placed at ₹522 for the target of ₹455. Revise the stop-loss lower to ₹490 as soon as the stock moves down to ₹475.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

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