Weekly Trading Guide

SBI (₹341.6)

 

SBI fell sharply last week to test the key support level of ₹335 as expected. The stock was down 3.1 per cent for the week. Whether it manages to sustain above ₹335 or not will decide the direction of the next move.

If SBI holds above the level of ₹335, a bounce to ₹350 and ₹360 is possible in the coming days. It has to breach the key resistance level of ₹362 to gain fresh momentum and rally further to target ₹390 and ₹400 levels. Inability to rise past ₹362 levels can trigger a pull-back move to ₹350 and ₹335 levels again. In such a scenario, a range-bound move between the levels of ₹335 and ₹362 can be seen for some time. On the other hand, if SBI declines below ₹335, it can extend the fall to ₹325 and ₹320 levels. As mentioned last week, the region around ₹320 is a strong long-term resistance-turned support. A further fall below ₹320 is less likely as fresh buyers are likely to emerge around ₹320 and limit the downside. The bias is bullish as the moving average indicators suggest limited downside for the stock.

 

ITC (₹275.9)

ITC fell for the third consecutive week. The stock was down 1 per cent last week. It is poised at a crucial long-term support level of ₹275. Whether ITC manages to bounce back from this support or not will decide the next move.

A strong bounce from this support and a subsequent rally above ₹282 will ease the downside pressure. Such a move could trigger a corrective rally to ₹290 in the near term. It will also give an early sign of the beginning of a fresh leg of a long-term uptrend. But if the stock declines below ₹275 levels, the downside pressure will increase. Such a break will increase the likelihood of the stock extending its down-move to ₹260. The bias on the daily chart is negative after the fall below ₹280 last week. Also, the 21-day moving average is on the verge of crossing below the 200-day moving average. This is a negative signal, indicating that the upside could be limited. This increases the possibility of the stock declining below ₹275 in the coming days and targeting ₹260 on the downside.

 

Infosys (₹739.5)

Infosys surged about 2 per cent intra-week to test ₹750, as expected. However, the stock failed to sustain higher and fell from the high of ₹750.85, giving back almost all the gains. The intermediate resistance at ₹755 seems to be holding well.

 However, as long as the stock trades above ₹730, the outlook will be positive. There is a strong likelihood of the stock breaking above ₹755 in the coming days. Such a break can take Infosys higher to ₹770 and ₹775. The stock will gain fresh momentum if it manages to rise past ₹775 decisively. The next targets are ₹790 and ₹800. But inability to breach the ₹770-775 resistance region can pull the stock lower to ₹755 and ₹750 again. In such a scenario, the broader ₹695-775 sideways range will continue to remain intact. The stock has been stuck in this range since January this year. This rally to ₹770-775 will get negated if Infosys declines below ₹730 in the coming sessions. In such a scenario, it could fall to ₹715 and ₹705. But this looks less probable as the bias on the charts is positive.

 

RIL (₹1,315.3)

RIL surged over 3 per cent in the initial part of the week, but failed to sustain higher. The stock made a high of ₹1,373 and reversed lower, giving back all the gains. The stock has closed 1 per cent lower for the week.

The price action over the last few weeks indicates that the stock lacks fresh follow-through buyers above ₹1,350 levels. This opens up the possibility of the stock breaking below the crucial support level of ₹1,300. Such a break will bring renewed pressure on the stock and trigger a fresh fall initially to ₹1,280-1,275 band. A further break below ₹1,275 will then increase the likelihood of the stock extending its down-move to ₹1,250 and ₹1,220 thereafter. On the other hand, if RIL manages to sustain above ₹1,300, a bounce to ₹1,350-1,370 can be seen again. In such a scenario, RIL can remain range-bound between ₹1,300 and ₹1,370 for some time. A strong break and a decisive close above ₹1,370 will boost the momentum and turn the outlook to positive. Such a break will then pave way for a fresh rally to ₹1,400 and ₹1,430.

 

Tata Steel (₹482.15)

Tata Steel is struggling to rise past the psychological level of ₹500 over the last couple of weeks. The stock made a high of ₹502.75 and reversed sharply lower to close 1.2 per cent lower for the week.

The near-term view is negative. Tata Steel is likely to remain below ₹500 and there is a strong likelihood of it falling to test the key 200-week moving average support level of ₹460. A bounce from ₹460 can take it higher to ₹480-490 again and keep the stock range-bound between ₹460 and ₹500 for some time. But a break below ₹460 can take it to the crucial support level of ₹445. As mentioned last week, the price action around ₹445 will need a close watch. A strong break below ₹445 will bring renewed pressure on the stock. It will keep the long-term downtrend intact and increase the likelihood of the stock tumbling towards ₹410 and ₹400 levels over the medium term.

 

The writer is a Chief Research Analyst at Kshitij Consultancy Services

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