Technical Analysis

Bellwethers: SBI, ITC, Infosys, Reliance, Tata Steel

Gurumurthy K | Updated on January 17, 2018 Published on July 09, 2016






SBI (₹218.4)

SBI rose to a high of ₹225 but gave back all its gains made during the week in the last two trading days. The 200-week moving average resistance at ₹226 has halted the rally in the stock. Immediate support is in the band between ₹213 and ₹215. A reversal from this support zone can take the stock back to test the resistance at ₹226. Inability to break above ₹226 can keep the stock range-bound between ₹213 and ₹226 for some time. On the other hand, if SBI breaks below ₹213, the fall can extend to ₹209 or ₹207 — the 200-day moving average support. Further break below ₹207 looks less probable. So medium-term investors who have taken long positions can hold them. They can also accumulate on dips near ₹215 and ₹210. Retain the stop-loss at ₹199 for the target of ₹255. The resistance at ₹226 is a key level that has to be breached decisively for the stock to gain fresh momentum. Such a break can take it higher to ₹242 and ₹245 initially. A rally beyond ₹245 can take it to ₹255 and ₹260 over the medium term.

ITC (₹245.8)

After tumbling 3 per cent on Monday, ITC remained stable and range-bound between ₹242 and ₹248 for the rest of the week. As expected, the stock is not facing fresh selling pressure near the 21-day moving average support around ₹241. There is a strong likelihood for it to remain range-bound between ₹240 and ₹260 in the coming days. A breakout on either side will decide the next leg of move. On the charts, the bias is bullish and there is a high possibility of the stock breaking above ₹260. Such a break can take ITC higher to ₹268 or ₹270 over the medium term. Investors with a medium-term perspective can make use of dips to buy near ₹241. Stop-loss can be placed at ₹228 for the target of ₹266. On the other hand, if the stock breaks below ₹240, it can fall to ₹235 or ₹230 — a strong medium-term support level. Also, the 21-week moving average has crossed over the 200-day week moving average, which is a bullish signal suggesting that the downside in the stock could be limited over the short term.

Infosys (₹1,158.7)

The 21-day moving average capped the upside in Infosys last week. The stock made a high of ₹1,194.8 and fell sharply to make a low of ₹1,153.2. However, the stock managed to recover slightly from this low to close 1 per cent lower for the week. The long wicks on the weekly chart for the last two weeks imply strong selling pressure on the stock between ₹1,190 and ₹1,195. This leaves a high possibility of the stock declining further. The 200-day and the 55-week moving average supports at ₹1,146 and ₹1,130 respectively are supports to watch. A test of these levels looks likely. Whether the stock reverses higher or not will decide the next leg of move. A corrective rally to ₹1,180 or ₹1,200 is possible if the stock manages to reverse higher from ₹1,146 or ₹1,130. On the other hand, a strong break below ₹1,130 will increase the downside pressure. Such a break can trigger a fresh fall to ₹1,100 or even ₹1,080. The outlook will turn positive only if it breaches above the ₹1,200 mark which will then pave way for a fresh rally to ₹1,250 and ₹1,270.

RIL (₹980.1)

RIL tested the ₹1,000 mark in the past week. But the stock failed to breach this psychological level and came off from the high of ₹1,002.8 to close at ₹980, up 0.7 per cent for the week. The immediate outlook is not clear. Immediate supports are at ₹976 and ₹972, which are the 21- and 200-day moving average levels. A strong break below ₹972 can increase the downside pressure and drag the stock lower to ₹960 or even ₹950 in the coming days. In such a scenario, the broader ₹930-₹1,000 range in which the stock has been trading since May will remain intact and a fall extending to ₹930 also cannot be ruled out. The sharp 2 per cent fall from the high last week suggests that the stock can retain this sideways range movement as long as it remains below ₹1,000. On the other hand, if RIL reverses higher from ₹972, a revisit of ₹1,000 is possible. However, the stock will gain fresh bullish momentum only if it records a decisive break above ₹1,000. This can take the stock higher to ₹1,015 — the 61.8 per cent Fibonacci retracement resistance.

Tata Steel (₹318.6)

Tata Steel is still not out of the woods. The hopes of a reversal waned as the stock tumbled 5 per cent on Thursday. The resistance at ₹338, mentioned last week has held well. The stock may continue to trade range-bound between ₹300 and ₹338 for some more time. A strong breakout on either side of ₹300 or ₹338 will decide the next leg of move. However, the medium-term view continues to remain bullish with strong support at ₹300. Also, the downside is expected to be limited to ₹288 — the 50 per cent Fibonacci retracement support — even if the stock breaks below ₹300. Medium-term investors can hold the longs and retain the stop-loss at ₹285. Accumulate longs on dips to ₹300. The stock will gain strong bullish momentum on a strong and decisive break above ₹338. The stock can then rise to ₹355 and ₹360 levels once again. Such a rise will confirm the end of the corrective rally and will also signal the beginning of a fresh leg of up-move.

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Published on July 09, 2016
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