Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on July 07, 2019 Published on July 07, 2019

Uptrend gains momentum in SBI (₹370.6)

The upmove in SBI is gaining momentum. The stock surged 2.7 per cent and closed in the green for the third consecutive week. The strong rally last week has pushed the stock above the crucial long-term resistance level of ₹362. The outlook is bullish, and it’s very likely the stock will rally to ₹395 and ₹400 in the coming weeks. A strong break above the intermediate resistance level of ₹373 will pave way for this rally. The region around ₹400 is a strong resistance, which can halt the current uptrend. On the other hand, if SBI fails to breach ₹373, a corrective fall to ₹362 is possible. In such a scenario, a sideways consolidation between ₹362 and ₹373 is possible for some time within the overall uptrend. However, the bias will remain positive for SBI during this sideways consolidation to break the range above ₹373. The level of ₹362 will act as a good support. A break below ₹362 looks less probable now. Dips to this support are likely to get fresh buyers coming into the market.

Near-term outlook is mixed for ITC (₹279.45)

ITC tumbled over 3 per cent intra-day on Friday but managed to claw-back recovering all the loss. The stock tumbled to a low of ₹268.1 on Friday and reversed sharply higher from there to close at ₹279.45, up 2 per cent for the week. The daily chart is showing early signs of a turnaround. But the medium-term chart suggests that the recent movement over the last one month could still be a consolidation within the downtrend. This leaves the near-term outlook mixed for ITC. The price action in the coming days will need a watch to get a clear cue on whether the downtrend is getting reversed or not. Key resistances are poised at ₹282 and ₹285. A strong rise past ₹285 is needed to ease the downside pressure. Such a break can take ITC higher to ₹300 and ₹305. On the other hand, if ITC fails to breach ₹285, it can initially test ₹277 — the 21-day moving average support. A further break below ₹277 will then increase the likelihood of the stock revisiting the crucial support level of ₹272

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Infosys poised for a crucial support (₹718.25)

Infosys fell about 2 per cent last week. The stock tumbled over 4 per cent over the last couple of weeks. The near-term outlook remains negative. However, crucial supports are on the cards, which can halt the current down-move. Support is in the ₹700-695 region. A bounce from this zone will keep the broader ₹695-775 sideways range intact. Infosys has been stuck in this range since mid-January this year. Such a bounce will ease the downside pressure and take the stock higher to ₹725-730 band. A further break above ₹730 will then increase the likelihood of the upmove extending to ₹750-760 levels. But if Infosys breaks below ₹695, it can test ₹685 — a crucial long-term trend-line support. A bounce from ₹685 can keep the stock in a narrow range between ₹685 and ₹700 or ₹720 for some time. But a strong break and a decisive close below ₹685 will signal a trend reversal. Such a break will increase the likelihood of the stock tumbling to ₹650 due to profit booking.

RIL is stuck in a sideways range (₹1,262.2)

RIL has been stuck in between its support at ₹1,245 and resistance at ₹1,315 over the last couple of weeks. The near-term outlook is mixed. A breakout on either side of ₹1,245 or ₹1,315 will determine the direction of the next move. If RIL manages to break the range above ₹1,315, it can move up to ₹1,350-1,360. Such a move will ease the downside pressure and bring back the possibility of the stock revisiting ₹1,400 levels. But if RIL breaks the range below ₹1,245, it can fall to ₹1,220. A further break below ₹1,220 will then increase the likelihood of the stock extending its down-move to ₹1,210 and ₹1,200. The region around ₹1,200 is a strong long-term support. A fall below ₹1,200 looks less probable now as fresh buyers are likely to emerge at lower levels. But a strong break below ₹1,200 will turn the outlook bearish and mark the end of the long-term uptrend that has been in place since 2017. In such a scenario, RIL will be in danger of tumbling to ₹1,150 and ₹1,100 levels.

Tata Steel retains its sideways range (₹478.15)

Tata Steel retains its ₹460-520 sideways range. Within this range, the stock tumbled over 5 per cent last week. The stock can dip further in the coming days to test ₹460 — the lower end of the range. A bounce from there will keep the sideways range intact and take Tata Steel higher to ₹500 levels again. The broader view remains the same. A breakout on either side of ₹460 or ₹520 will decide the direction of the next move. A strong break above ₹520 will see the stock moving up to ₹550 and ₹560. On the other hand, if Tata Steel breaks the current range below ₹460, it will come under renewed pressure. Such a break will bring back the long-term downtrend that has been in place since 2018. It will also increase the likelihood of the stock tumbling to ₹400 levels. The move below ₹460 could be sharp and swift.

 

The writer is a Chief Research Analyst at Kshitij Consultancy Services

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