A reversal pattern to keep SBI under pressure (₹273.6)
SBI tumbled over 5 per cent last week. The key support at ₹283, which we had expected to hold, was broken decisively and SBI fell sharply triggering the stop-loss (₹270) on the long positions taken at ₹219 in July 2016. Although the 200-day moving average support at ₹270 has halted the fall as of now, SBI is in danger zone as a head and shoulder reversal pattern has been formed on the daily chart. The neckline resistance of this pattern is at ₹283 and it can be tested if the stock manages to sustain above ₹270 in the coming days. If SBI manage to sustain above ₹270, a bounce to ₹282 or ₹283 is possible. But a strong break and a decisive close below ₹270 will confirm the reversal pattern. Such a break can take the stock lower to ₹260 initially. Further break below ₹260 will increase the likelihood of the fall extending to ₹250 or even ₹245 thereafter. The downside pressure will ease only if SBI breaches ₹283 decisively; the possibility of further fall will get wiped out only if the stock rises past ₹290.
Uptrend gains momentum in ITC (₹323.8)
After trading in a narrow range almost all through the week, ITC surged 4 per cent on Friday to close on a strong note. The bullish outlook is intact. Key supports are at ₹318 and ₹315, which can limit the downside in the near term. A rise to ₹335 and ₹340 is likely in the short term. Inability to break above ₹340 can trigger a pull-back move to ₹320. But an eventual break above ₹340 can take the stock higher to ₹350 initially. Further break above ₹350 will increase likelihood of the stock extending its rally to ₹375 levels. Investors can hold the long positions. Revise the stop-loss higher to ₹310 and book profits at ₹330. Short-term traders with a high risk appetite can go long on dips at ₹319. Stop-loss can be placed at ₹307 for the target of ₹345. Revise the stop-loss higher to ₹323 as soon as the stock moves up to ₹335. The outlook for ITC will turn negative only if it declines below ₹300 decisively. The possibility of the stock falling to ₹290 or ₹285 will increase in such a scenario. But such a strong fall looks unlikely at the moment.
Infosys retains its sideways move (₹935.6)
Infosys remained range-bound in the past week as expected. Support for the stock is in the ₹923-₹921 region. Resistance is at ₹975. Infosys can continue to trade sideways between ₹921 and ₹975 for some more time. A breakout on either side of ₹921 or ₹975 will then decide the next move. A break above ₹975 can see a rise to ₹1,000. Further break above ₹1,000 will increase the likelihood of the stock extending its rally to ₹1,030 and ₹1,045. On the other hand, the stock will come under pressure if it breaks below ₹921. A fall to ₹910 or ₹900 is possible in such a scenario. A strong upward reversal from ₹900 will mean that the broader ₹900-₹1,045 sideways range is intact. Infosys can then rise to ₹950 or ₹970 thereafter. But a strong break below ₹900, if seen, can take the stock lower to ₹875 initially. Further break below ₹875 can drag it to ₹850 or ₹830. As being reiterated in this column, the region between ₹830 and ₹800 is a significant long-term support zone which can halt the downtrend. Investors can hold the long positions.
RIL can dip before reversing higher (₹1,380.2)
RIL failed to gain strength and break above the resistance at ₹1,450. The stock fell sharply to close 3.8 per cent lower for the week, thereby giving up all the gains made in the previous week. The 21-day moving average support at ₹1,370 is likely to be tested in the coming days. A bounce from this support can take the stock higher to ₹1,400. But a fall below ₹1,370 will increase the likelihood of the downmove extending to ₹1,360 or even ₹1,348. The level of ₹1,348 is a significant trend support and an immediate break below it looks less probable. An upward reversal from ₹1,348 may take RIL higher to ₹1,400 and ₹1,450 once again. Having said that, a break below ₹1,348 can drag the stock further lower to ₹1,310 and ₹1,300 thereafter. The level of ₹1,450 is a crucial resistance, which has been restricting the upside in the stock. A strong break above ₹1,450 is needed for RIL to gain fresh momentum, which can then pave way for the next targets of ₹1,485 and ₹1,500. Investors can hold the long positions with a revised stop-loss at ₹1,260.
Tata Steel breaks above a crucial barrier (₹544.3)
Tata Steel sustained above the psychological ₹500 level and surged over 7 per cent last week. The strong rally last week has aided the stock to break and close well above the crucial resistance level of ₹535. Whether the stock manages to sustain above ₹535 or not will be key in deciding the next move for it. The region between ₹535 and ₹533 may now act as a good support. If the stock declines below ₹533, it can fall to ₹523 initially. Further break below ₹523 will increase the possibility of the fall extending to ₹515. But if the stock manages to sustain above ₹533 in the coming days, it can continue to trade strong. A rise to ₹580 — the next significant long-term resistance is likely. The possibility of a corrective fall from ₹580 targeting ₹550 or ₹535 cannot be ruled out thereafter. Investors who have booked partial profits at ₹535 as advised can keep the stop-loss for the rest of their holdings at ₹480. Move the stop-loss higher to ₹495 as soon as the stock moves up to ₹565.
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