Technical Analysis

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

GURUMURTHY K | Updated on January 17, 2018 Published on August 21, 2016

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SBI (₹258.5)

Key resistance at ₹264 for SBI

SBI has skyrocketed 11 per cent over the last two weeks on the back of its quarterly results and the company’s board approving and announcing the merger ratio with its associate banks. Friday’s gap-up opening has helped it break above the 100-week moving average resistance at ₹246 which may now serve as a good support. Resistance is near current levels at ₹264 – the 61.8 per cent Fibonacci retracement level which is likely to be tested in the near-term. If SBI manages to break above this resistance, it can rise to ₹275 or even higher thereafter. But, inability to break above ₹264 can trigger a corrective fall to ₹250 or ₹245 in the short-term. The stock has been moving up consistently for almost three months now. So there is a strong likelihood of the uptrend to pause and of an ensuing corrective fall. However, such corrective falls will be a good buying opportunity. Investors with a medium-term perspective can buy on dips near ₹245 with a stop-loss at ₹205.

ITC (₹251.0)

ITC is trapped inside a sideways range

ITC has been trapped within the ₹245-₹262 range for the sixth consecutive week. The stock made a high of ₹257.95 on Tuesday and has come off from there to close flat for the week. There is a strong likelihood of a fall to ₹245 — the lower end of the range in the begining of the coming week. A reversal from there will keep the sideways move intact and can take ITC higher to ₹255 and ₹260. On the other hand, a break below ₹245, though less probable, may drag the stock lower to ₹240. Further fall below ₹240 is unlikely. The bias remains positive for ITC to break the range above ₹262. A strong weekly close above ₹255 will be the first confirming signal for the stock to rally beyond ₹262. Such a break can take ITC to ₹268 and ₹270 initially. Further break above ₹270 will pave way for a medium-term target of ₹290. Medium-term investors can hold their long positions and accumulate near ₹245 if the stock falls below ₹250 this week. Retain the stop-loss at ₹228 for the target of ₹270.

Infosys (₹1,021.1)

Downtrend intensifies in Infosys

Infosys opened with a gap-down and fell 4 per cent last week. The fall has taken the stock well below an important support at ₹1,050. It has also confirmed the reversal of the long-term uptrend that was in place since 2013. The outlook is bearish. The immediate target is ₹1,000. If this psychological support holds, there is a possibility of a corrective rally to ₹1,020 or ₹1,030. However, the overall view will continue to remain bearish. Strong resistance is around ₹1,060 which is likely to cap the upside in the short-term. The stock is expected to eventually decline below ₹1,000. Such a fall can take Infosys lower to ₹950 or ₹930. The 200-week moving average at ₹923 and the 50 per cent Fibonacci retracement level at ₹913 are crucial supports. A test of these supports looks evident. Whether the stock manages to reverse higher from there are not will decide the next leg of move for Infosys. A reversal from ₹923-₹913 may have the potential to take the stock higher to ₹1,000 levels once again.

RIL (₹1,014.8)

RIL is range-bound with a bullish bias

RIL is stuck inside a sideways range between ₹985 and ₹1,045 over the last one month. A breakout on either side of this range will give cue on the next trend. Within the range, the possibility of a dip to test ₹1,000 in the initial part of the week cannot be ruled out. A break below it can take RIL lower to ₹985. However, the cluster of moving average supports between ₹1,000 and ₹985 leaves the possibility high for a reversal from this support region. A strong break and a decisive weekly close above ₹1,040 will be the first signal of the range breakout. Further rise above ₹1,050 will confirm the same. Such a break can take RIL higher to ₹1,070 thereafter. It will also increase the possibility of the stock revisiting ₹1100 levels over the medium-term. Short-term investors can hold the longs and accumulate on dips near ₹1,000. Retain the stop-loss at ₹975 for the target of ₹1,060. The outlook for the stock will turn negative only if it declines decisively below ₹985. The next targets will be ₹950 or ₹935.

Tata Steel (₹392.3)

Uptrend gains momentum in Tata Steel

The bullish outlook remains intact for Tata Steel. The stock rose 4.7 per cent last week. This rally has taken it well above the 50 per cent Fibonacci retracement resistance at ₹387. This strengthens the uptrend that has been in place since February. The next target is ₹431 – the 61.8 per cent Fibonacci retracement level. There is neat and clear inverted head and shoulder pattern visible on the weekly chart from the price action since 2015. The rally in the last few weeks is confirming this pattern. The neckline support of this pattern is around ₹350. The 200-week moving average is also posed around the same levels. This leaves the possibility for the stock to remain well above ₹350 in the coming weeks. The target of this pattern is ₹535 which is likely to be achieved over the medium to long-term. So every dip will be a good buying opportunity in this stock. Medium-term investors can continue to hold their longs. Accumulate with a stop-loss at ₹310.

Published on August 21, 2016

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