Technical Analysis

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

Gurumurthy K | Updated on January 20, 2018 Published on June 25, 2016

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SBI (₹211.2)



SBI managed to move up sharply after opening with a gap-down. However, the resistance at ₹218 halted the up-move and the stock fell to a low of ₹202.5 before closing one per cent down for the week. The weekly candle suggests indecisiveness and sideways move between ₹200 and ₹218 for some time. A breakout on either side will decide the next leg of move. Immediate support is around ₹207, where both the 200- and 21-day moving averages are placed. If the stock manages to sustain above this support, a rise to test the resistance at ₹218 is possible. In that case, there is a strong possibility of it breaking above ₹218. Such a break can take SBI higher to ₹221 and ₹225. A strong break above ₹225 will see the stock surging further to ₹240 in the short term. But, if SBI declines below ₹207, it can fall to ₹200. From the chart, the bias is positive as the 21-day moving average is on the verge of crossing over the 200-day moving average. So the downside in the stock is expected to be limited in the short term.



ITC (₹353.4)



ITC was stuck in the ₹345-₹365 range for the fourth consecutive week. Friday’s candle suggests that the stock is more likely to move down to test ₹345. If it manages to reverse higher from ₹345, then a rise to revisit ₹365 can be seen. In that case, the stock can continue to trade range-bound between ₹345 and ₹365 for some more time. Only a breakout on either side of ₹345 or ₹365 will decide the next leg of move. A strong break above ₹365 will boost the bullish momentum and take the stock higher to ₹380. Such a break will also increase the possibility of the stock revisiting ₹400 levels. On the other hand, if the stock breaks the range below ₹345, it can fall to ₹338 — the 100-week moving average. Further break below ₹338 looks less probable at the moment. On the charts, the levels of ₹345 and ₹338 are strong support for the stock. So the downside for ITC could be limited in the short term. Having said this, there is a strong possibility of the stock breaking above ₹365 and rising to ₹380 in the short term.



Infosys (₹1,194.5)



Infosys faced strong resistance near ₹1,215 and tumbled to a low of ₹1,159. However, the stock managed to reverse up from this low and close 1.4 per cent higher. Though the price action on the daily chart is not very bullish, from the weekly chart, the near-term view looks positive. But a strong break above the 21-day moving average at ₹1,219 is needed for the stock to gain momentum. Such a break can take Infosys higher to ₹1,245. If the stock manages to rise past ₹1,245, then the rally can extend up to ₹1,270 or ₹1,280. Traders with a short-term perspective can go long on a break above ₹1,220. Stop-loss can be placed at ₹1,210 for the target of ₹1,245. Revise the stop-loss higher to ₹1,130 as soon as the stock moves up to ₹1,135. On the downside, ₹1,184 is an important near-term support. A strong break below this support can put the stock under pressure. Such a break can increase the possibility of the stock falling to ₹1,150 or ₹1,142 — the 200-day moving average support in the short-term.



RIL (₹951.5)



Last week, RIL broke the resistance at ₹990, but failed to sustain above it. The stock made a high of ₹995 and tumbled to a low of ₹934.4, before closing at ₹951.5, down 2.2 per cent for the week. It has closed decisively below the 21-day moving average at ₹969, which will now act as a resistance. Inability to break above ₹969 can keep the stock under pressure and drag it to test an important support around ₹940. If RIL fails to reverse higher from ₹940 and declines, it can fall to ₹910 thereafter. Traders with a short-term perspective can go short on a reversal from ₹969. Stop-loss can be placed at ₹980 for the target of ₹942. Revise the stop-loss lower to ₹960 as soon as the stock moves down to ₹955. On the other hand, if RIL manages to reverse higher from ₹940, it can rise to ₹980 once again. The stock can thus trade range-bound between ₹940 and ₹990 for some time. The 21-week moving average at ₹988 is an important resistance for the stock. Only a decisive break above this resistance level will turn the outlook positive.



Tata Steel (₹312.5)



The outcome of the UK referendum knocked down Tata Steel 6 per cent on Friday. The stock opened with a huge gap-down and touched a low of ₹297.4 before recovering slightly in the final trading sessions. It closed 4 per cent lower for the week. The strong support in the ₹300-₹295 zone, that we have been reiterating in this column for several weeks, is holding out well as of now. A test of this support zone once again this week cannot be ruled out. But, technically, from the charts, as long as this support zone holds, there is no danger of any further fall in the stock. While trading above ₹295, the stock can stay range-bound between ₹295 and ₹315 in the near term. A strong break above ₹315 will ease the downside pressure and take the stock higher to ₹322 or ₹325 in the short term. So investors can continue to hold the long positions with the same stop-loss at ₹285. In case Tata Steel declines below ₹295, it can fall to ₹288, which is the 50 per cent Fibonacci retracement support level.





Published on June 25, 2016
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