Technical Analysis

High Five: SBI, ITC, Infosys, RIL, Tata Steel

Yoganand D | Updated on August 17, 2014 Published on August 17, 2014

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SBI (₹2,361.8)

After testing the key support at ₹2,400, which is also the base line for a descending triangle pattern, the stock breached it by declining 2.2 per cent last week. Since the May high of ₹2,833, SBI has been on a short-term downtrend. It continues to trade well below its 21- and 50-day moving averages. Traders with a short-term horizon can consider holding their short positions with a stop-loss at ₹2,420.

Targets are the same, at ₹2,300 and ₹2,250 levels. Key medium-term support is at ₹2,150, which is a 50 per cent fibonacci retracement level of the stock’s prior uptrend. A strong fall below this level will mitigate the medium-term uptrend and drag the stock down to ₹2,000. On the upside, important resistance is at ₹2,500 and then in the band between ₹2,580 and ₹2,600. Key hurdles above ₹2,600 are at ₹2,750 and ₹2,850.

ITC (₹356.7)

The stock of ITC advanced 2.4 per cent, breaching its 21-day moving average last week. The stock appears to have resumed the short-term uptrend that has been in place from the late June low of ₹312. It is hovering well above its 50- and 200-day moving averages, strengthening the uptrend. The indicators on the daily chart feature in the bullish territory, backing the stock’s uptrend.

Both investors with a short- and medium-term perspective can consider buying the stock at declines with a stop-loss at ₹335. The near-term target is ₹365. An emphatic breakthrough of this level can take the stock higher to ₹375 and then to ₹385 in the medium-term. On the downside, a fall below the immediate support at ₹345 can pull the stock down to ₹340 or ₹330. A strong decline below ₹330 will mar the uptrend and pull it down to ₹315.

Infosys (₹3,603.7)

Infosys continued its bullish momentum, as it surged 3.5 per cent last week. Since the late May trough of ₹2,894, the stock has been on a short-term uptrend. The indicators on the daily chart feature in the positive terrain. The indicators on the weekly chart have just entered the positive area, strengthening the uptrend. Traders with a short-term perspective can consider holding their long positions with a stop-loss at ₹3,450.

The stock has touched its initial target of ₹3,600 and is now likely to reach ₹3,650. The inability to move above ₹3,650 will be cue for taking some profits and waiting. It can consolidate sideways between ₹3,450 and ₹3,650 before resuming upwards. Only a strong breakout of ₹3650 can take it to ₹3,800 in the medium-term. Conversely, a fall below ₹3,450 can drag the stock down to ₹3,350 and then to ₹3,200.

RIL (₹1001.9)

The stock advanced 2 per cent last week, amidst a choppy trade. It has been on a short-term downtrend from its May high of ₹1,142 levels. This trend will continue as long as the stock trades below the key resistance zone between ₹1,050 and ₹1,060. On the downside, significant support is in the ₹960-₹970 zone, cushioning the stock’s fall. Both the daily and weekly relative strength indices are hovering in the neutral region.

Other indicators are giving mixed signals. Therefore, traders with a short-term perspective should tread with caution as long as the stock trades between ₹960 and ₹1,060 levels. A downward break of ₹960 level will pull the stock down to ₹930 and then to its subsequent support level at ₹920 and ₹900 respectively. Key resistances above ₹1,060 are pegged at ₹1,100 and ₹1,142 respectively.

Tata Steel (₹541.3)

Last week, the stock was volatile and closed on a slightly positive note. But any rally in the stock will encounter resistance in the band between ₹570 and ₹580, pausing at ₹550. The stock has been consolidating sideways in the broad range of ₹500 and ₹580 since early June 2014. A fall below the immediate support at ₹520 can pull the stock down to ₹500. In such a scenario, traders with a short-term perspective can consider initiating short position with a stop-loss at ₹525.

The relative strength index on the weekly chart displays a negative divergence. This indicates the possibility of the stock’s trend reversal, but this can be confirmed only after it falls decisively below ₹500. Important supports below ₹500 are at ₹476 and ₹450. Conversely, rally above ₹580 can push the stock higher to ₹600 and then to ₹630.

Published on August 17, 2014
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