Technical Analysis

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

Gurumurthy K | Updated on January 20, 2018 Published on June 12, 2016

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200-DMA is haulting the rally in SBI (₹206.2)



SBI surged last week breaking above the psychological resistance level of ₹200. However, the 200-day moving average at ₹210 has halted the rally. SBI touched a high of ₹212.8 but has come off from there to close 5 per cent higher for the week. Immediate support is at ₹204 which is likely to be tested early this week. A break below it can take the stock lower to ₹200 or even ₹195. On the other hand, if the stock manages to move higher from ₹204, it can boost the bullish momentum. In such a scenario, there will be a good possibility of it breaching the 200-day moving average resistance decisively. Such a break can take SBI higher to ₹216 or even ₹220 this week. Traders with a short-term perspective can go long on a reversal from ₹204. Keep the stop-loss at ₹198 for the target of ₹215. Revise the stop-loss higher to ₹210 as soon as the stock moves up to ₹213. The short-term outlook will turn negative only if SBI declines decisively below ₹195. The next targets will be at ₹190 and ₹180 levels.



ITC is range-bound with a bullish bias (₹351.5)



ITC is stuck in a sideways range between ₹350 and ₹365 over the last two weeks. A breakout on either side of this range will decide the next leg of move for the stock. It is currently poised at the lower end of the range. If it reverses higher from ₹350, the range will remain intact and the stock can rise to ₹360 and ₹365 once again. A strong break above ₹365 will confirm the range breakout and can trigger a fresh rally. Such a break can take ITC higher to ₹380. The breakout will also have the potential to take it to ₹400 levels. Inability to break above ₹365 and a subsequent reversal can drag it back to ₹350. A strong break below ₹350 can take the stock lower to ₹344, which is very important and a strong short-term support. A break below this support is less probable. So downside in the stock is expected to be limited to ₹344 even if it breaks the current range below ₹350. Medium-term investors can go long at current levels and accumulate on dips to ₹345. Keep the stop-loss at ₹335 for the target of ₹390.



Infosys to test a key resistance at ₹1,170 (₹1,180.8)



Infosys tanked 7 per cent last week, wiping out all the gains made in the earlier two weeks. The resistance in the ₹1,280-₹1,285 zone is continuing to cap the upside in the stock. A crucial support is at ₹1,170, which can be tested this week. Whether the stock breaks below this support or reverses higher from there will decide the next leg of movement. If the stock manages to reverse higher from this support, it can remain range-bound between ₹1,170 and ₹1,280 for some time. Only a decisive close above ₹1,285 will bring back fresh bullish momentum. The next targets will be ₹1,300 and ₹1,330. But if Infosys declines below ₹1,170, it can fall to ₹1,150 or even ₹1,140. The 200-day moving average at ₹1,138 is an important short-term support for the stock. If the stock breaks below this support, the fall can extend to ₹1,120 and ₹1,115. An upward reversal from the 200-day moving average support will ease the downside pressure. Such a reversal can take the stock higher to ₹1,170 and ₹1,180 once again.



Immediate outlook is not clear for RIL (₹975.6)



RIL found support at ₹950 and has reversed upward from there to close 1.8 per cent higher for the week. The immediate outlook is not clear. The weekly chart suggests a sideways move between ₹930 and ₹990 in the short term. Traders can stay out of the market until the stock breaks out on either side of this range, which will then give a clear trade signal to take positions accordingly. If the stock manages to sustain higher, a further rise to test the resistances at ₹980 and ₹990 is possible. A reversal from either of these resistances can take the stock lower to ₹950 once again. A strong break below ₹950 can lower it to ₹930. Such a break will also keep the stock pressured to test the key 200-week moving average poised at ₹908. As long as the stock trades below the psychological ₹1,000 mark, the broader trend will remain pointed down. So while below ₹1,000, a fall to test the 200-day moving average support cannot be ruled out. It will also keep the long-term range of ₹800-₹1,100 intact.



Tata Steel can test support at ₹330 (₹334.9)



Tata Steel is facing resistance near ₹346. A strong upward reversal from ₹330 will keep the uptrend that had begun from the May low of ₹311 intact. A rise to retest the resistance at ₹346 is possible in that case. It will also keep the possibility for the stock to break above this hurdle, high. A decisive close above ₹346 can take the stock higher to ₹360 and ₹365. It will also confirm the resumption of the overall uptrend that has been in place since February. But, if the stock declines below ₹330, a fall to ₹320 or even ₹310 is possible. In that case, the corrective fall that had begun from the April high of ₹364 will remain intact. In such a scenario, the down-move may extend even to ₹300 in the short term. However, as being reiterated in this column, ₹300-₹295 is a strong support zone and a break below it is unlikely. So medium-term investors can continue to hold the long positions. Retain the stop-loss at ₹285 and accumulate longs on dips.





Published on June 12, 2016
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