Technical Analysis

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

Gurumurthy K | Updated on January 20, 2018 Published on June 19, 2016






SBI (₹213.4)

SBI managed to sustain above the psychological ₹200 mark last week and surged 3.5 per cent. It fell on the first trading day of the week to test ₹200, but subsequently reversed higher. Last week’s rally has taken it well above the 200-day moving average resistance at ₹209. A key trend line is also poised around ₹209, making this a strong support for the coming week. While the stock may test this support, a break below it is less probable. A reversal from ₹209 will keep the bullish view intact. A rise to ₹218 and ₹220 — the 38.2 per cent Fibonacci retracement resistance — is possible in the near term. Inability to break above ₹220 can trigger a pull back move to ₹210 or ₹205. But a strong break above ₹220 can boost the bullish momentum and take SBI higher to ₹225 immediately and to ₹230 and ₹240 thereafter. Traders with a short-term perspective can go long on dips near ₹209. Stop-loss can be placed at ₹203 for the target of ₹220. Revise the stop-loss higher to ₹212 as soon as the stock moves up to ₹216.

ITC (₹359.55)

The support at ₹344 in ITC, as expected, has held up well in the past week. The stock fell to a low of ₹345.7 early last week and reversed sharply higher to close with over 2 per cent gains for the week. A test of the key resistance at the level of ₹365 is possible in the coming week. Whether the stock manages to break above this hurdle or not will then decide the next leg of move. A reversal from ₹365 can take the stock lower to ₹355 or even ₹350 in the short term. In such a scenario, the stock can remain range-bound between ₹345 and ₹365 for some time. On the other hand, a strong break above ₹365 will boost the bullish momentum. Such a break can take the stock higher to ₹380 initially. This will also have the potential to take ITC higher to ₹400 over the short term. On the charts, the level of ₹345 is a strong support which is likely to limit the downside in the stock in the short term. Medium-term investors who have taken long positions last week can continue to hold it. Retain the stop-loss at ₹335 for the target of ₹390.

Infosys (₹1,178.3)

Infosys was stuck inside a narrow range between ₹1,166 and ₹1,194 last week. The weekly chart reflects indecisiveness in the market. Also, the stock hovering around the 100-day moving average at ₹1,181 leaves the immediate outlook unclear. Traders can stay away until a clear trend emerges. However, as long as the stock trades below ₹1,200, the short-term outlook will remain negative. A decisive close below the 100-day moving average will add pressure to the stock. In such as scenario, Infosys can fall to ₹1,150 and ₹1,140. The 200-day moving average at ₹1,140 is an important support . If the stock extends the fall, breaking below this support, it can test ₹1,120 and ₹1,110 on the downside. On the other hand, a reversal from the level of ₹1,140 can see a bounce back to ₹1,180 or even ₹1,200. A strong break above ₹1,200 will ease the downside pressure and take the stock higher to ₹1,220. Only a decisive break and a close above ₹1,220 will turn the outlook positive for the stock. The next targets will be ₹1,245 and ₹1,275.

RIL (₹973.25)

RIL was stuck in a narrow range between ₹964 and ₹985 in the past week. The immediate outlook remains unclear. Support is at ₹960 and resistance at ₹990. A breakout on either side of these two levels will decide the next leg of move for the stock. A strong break above ₹990 will ease the downside pressure. Such a break will increase the chances of the stock rising above the psychological ₹1,000 mark to ₹1,020 in the short term. Such a rise will also reduce the possibility of seeing any fresh fall in the stock. On the other hand, if RIL breaks below ₹960, it can fall to ₹950 or ₹940 in the near term. Further break below ₹940 will increase the downside pressure and drag the stock lower to ₹920 and ₹910 thereafter. The 200-week moving average at ₹908 is a crucial support for the stock. If the stock manages to reverse higher from this support, a bounce back to ₹950 is possible. But a decisive break and a weekly close below ₹908 will increase the danger of the stock declining to ₹850 and ₹830 over the medium term.

Tata Steel (₹325.5)

Tata Steel opened with a gap-down and closed 2.8 per cent lower in the past week. The stock was stuck inside a sideways range between ₹321 and ₹333. The 55-day moving average at ₹332 has restricted an up move in the stock through the week. A strong break above this hurdle is needed to take the stock higher to ₹340 and ₹345 levels. However, only a strong break and a decisive close above ₹345 will boost the bullish momentum to take the stock back to ₹360 or higher levels in the short term. Having said that, the near-term outlook will remain negative as long as the stock trades below this moving average resistance. Immediate support is at ₹320. A break below it can trigger a fall to ₹310 or even lower 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. Accumulate longs on dips near ₹310 and ₹300. Retain the stop-loss at ₹285.

Published on June 19, 2016
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