Market Strategy

Pivotals: Reliance Industries (Rs 937.3)

Yoganand D. | Updated on February 19, 2011





Following a four-day rally last week, RIL encountered resistance at Rs 960 on Friday and retreated to finish the week with a 3 per cent gain. The short-term trend is down for the stock since the January peak of Rs 1,090. This downtrend remains in place as long as the stock trades below its key resistance level at Rs 960, which also coincides with its 38.2 per cent Fibonacci retracement level of the downtrend. Traders can consider initiating fresh short positions if the stock fails to move above this resistance. Targets are Rs 920, 900 and Rs 985. However, strong breach of this resistance can weaken the downtrend and lift the stock higher to Rs 986 and then to Rs 1,000–1,010 band.

The stock continues to consolidate sideways in the broad range between Rs 880 and Rs 1,160. Investors can hold the stock as long as it the counter hovers above Rs 885. Supports below this level are at Rs 858 and Rs 832.

State Bank of India (Rs 2,755.3)

The stock surged 6.6 per cent in the last trading session, breaching its 50 and 200-day moving averages. Immediate supports for the stock are at Rs 2,729 (200-DMA), Rs 2,695 and Rs 2,640. It can decline and test its 200-DMA in the week ahead. However, reversal for the second support would be a cue to initiate fresh long position with targets of Rs 2,800 and Rs 2,850. Strong close below Rs 2,695 can drag the stock down to Rs 2,640 initially and then to Rs 2,606.

Medium-term trend is down for the stock. Only a strong move above Rs 3,000 will mitigate this trend. Significant long and medium-term support for the stock is at Rs 2,500. Emphatic decline below this level will pull the stock down to Rs 2,200 or even to Rs 1,900.

Tata Steel (Rs 637.9)

Tata Steel jumped 7 per cent last week recovering the losses from the week before. The stock encountered resistance at Rs 660 on Friday, the second resistance level mentioned in this column last week. It tumbled 2.6 per cent, forming a bearish engulfing candlestick pattern in the daily candlestick chart. Short-term traders can initiate fresh short positions with stop loss at Rs 655. Downward targets are Rs 620 and Rs 600. On the other hand, penetration of key resistance at Rs 660 will give a positive medium-term outlook and in that case stock can rally to Rs 680 and Rs 710.

Infosys Technologies (Rs 3,096.4)

Infosys managed to close on a positive note for the week by gaining 1.8 per cent. The stock has been moving sidewaysin the range between Rs 3,023 and Rs 3,162 since beginning of this month. Moreover, it has formed a spinning to pattern in the weekly chart signalling indecisiveness. As long as the stock remains in the mentioned range, traders should tread cautiously.

Strong move above Rs 3,162 would be cue for traders to initiate long positions with a target of Rs 3,200 and then Rs 3,245. Failure to move above Rs 3,162 can pull the stock down to Rs 3,023 levels. Supports below this level are at Rs 3,000 and Rs 2,950. Significant close below the second support can pull the stock lower to Rs 2,600-2,670 band in the medium-term.

Published on February 19, 2011

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