Bellwethers. Weekly Trading Guide

Immediate outlook is unclear for SBI (₹313.15)

After falling for two consecutive weeks, SBI closed on a flat note last week. The stock was stuck in a narrow range between ₹309 and ₹321 in the past week. The immediate outlook is not clear. A breakout on either side of ₹309 or ₹321 will decide the next move. A strong break above ₹321 will ease the downside pressure and can take the stock higher to ₹327 — the 21-day moving average resistance initially. Further break above ₹327 level will increase the likelihood of the stock’s up move extending to ₹335 or even to ₹340 thereafter. On the other hand, if SBI breaks and closes decisively below ₹309, it will come under selling pressure. In such a scenario, the possibility of the stock falling to ₹300 or ₹297 on the back of profit booking will be high. Further break below ₹297 can drag the stock to ₹290 thereafter. Traders can hold the short positions taken at ₹315. Revise the stop-loss lower to ₹322 for the target of ₹292. Move the stop-loss lower to ₹305 as soon as the stock moves down to ₹299.

ITC bounces from a key long-term (₹261.7)

ITC fell as expected in the past week breaking below the support at ₹253.5. However, this down move did not sustain. The stock reversed sharply recovering all the losses from its low of ₹250.5 on Thursday and close 2.5 per cent higher. The short positions recommended last week has been stopped out during this sudden reversal. The strong upward reversal last week has taken the stock well above the 21-day moving average resistance, which was capping the upside since November. Also, the strong bounce last week is technically significant as it has happened from a key long-term trend-line support level of ₹249. Immediate resistance is at ₹264, which is likely to be tested in the coming days. If ITC manages to surpass this hurdle, the downside pressure will ease. A rise to test ₹269 or ₹271 — the key 21-week moving average resistance is possible. But if the stock reverses lower from ₹264, it can fall to ₹260 or ₹257. Such a pull-back move will keep the stock in range bound between ₹250 and ₹264 for a while.

Near-term outlook is positive for Infosys (₹1,001.5)

Contrary to expectation, Infosys surged 4.5 per cent last week. The 55-day moving average, which is about to cross 100-day moving average suggests that the downside could be limited and leaves near-term view positive. The current upmove can extend to ₹1,020. A break above ₹1,020 can take it to ₹1,030 and ₹1,035. The region between ₹1,030 and ₹1,035 is a crucial resistance. A strong weekly close above ₹1,035 will signal the reversal of the long-term downtrend that has been in place since June 2016. Such a break will increase the likelihood of the stock targeting ₹1,200 or ₹1,300 over the long term. But if Infosys reverses lower from ₹1,020 or from the ₹1,030-₹1,035 region, it can fall to ₹1,000 or ₹975. In such a scenario, the prolonged sideways range between ₹900 and ₹1,035 that has been in place since November 2016 will remain intact. So, a subsequent fall below ₹975 will then increase the possibility of the stock falling to ₹950 or ₹900. Investors can hold long positions.

Resistance caps upside for RIL (₹920.95)

RIL reversed higher in the past week after making a low of ₹895.9 on Tuesday. The stock closed 1.2 per cent higher for the week. The weekly candlestick reflects indecisiveness in the market. Resistance is at ₹937 and support is at ₹918 — the 21-day moving average. A breakout on either side of these levels will decide the next move. If RIL declines below ₹918, it can fall to ₹905. Further break below ₹905 will increase the likelihood of the stock tumbling to ₹893 or ₹882. As mentioned last week, a fall to ₹882 will form a double-top reversal pattern on the chart. A decisive break below ₹882 will confirm the pattern and increase the possibility of the stock falling to ₹845. Further break below ₹845 can drag it to ₹830 or even to ₹800. On the other hand, if RIL manages to break above ₹937 in the coming days, the downside pressure will ease. Such a break can take the stock higher to ₹959 and ₹961. The region between ₹959 and ₹961 is a crucial resistance, which has to be broken to target ₹1,000.

Supports can limit the downside for Tata Steel (₹696.8)

Tata Steel tumbled about 3 per cent in the initial part of the week and made a low of ₹660.6. However, the stock managed to reverse sharply from this low and close 2.4 per cent higher for the week. Support is at ₹684, which is likely to limit the downside in the near term. A rise to test the resistance at ₹715 is likely in the coming days. A strong break and a decisive close above ₹715 will boost the momentum. Such a break can take the stock higher to ₹740 in the short term. On the other hand, if Tata Steel reverses lower from ₹715, it can fall to ₹690 or ₹684 again. Such a pull-back move will increase the likelihood of the stock breaking below ₹684 and revisit ₹670 and ₹660 levels. If the stock breaks below ₹660, the down move can extend to ₹650. The 21-week moving average at ₹660 and a trend-line support at ₹650 are the key supports for the stock. A sharp fall breaking below ₹650 is less likely. Fresh buying interest may emerge in the ₹660-₹650 region.

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