Technical Analysis

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

gurumurthy K | Updated on January 17, 2018 Published on August 28, 2016






Tata Steel may reverse higher after a dip (₹369.8)

Contrary to the expectations of for a rise, Tata Steel fell 5.7 per cent and gave back all the gains made in the week earlier. The stock has failed to sustain the break above ₹387. It has also closed breaking below the 21-day moving average support at ₹374, implying a negative which leaves the near-term view negative. A fall to test the next support at ₹359 looks likely this week. A reversal from this support can take the stock higher to ₹375. Further break above ₹375 will ease the downside pressure and push it higher to ₹390 and ₹395 once again. But a break below ₹359 can take the stock lower to ₹356 — the neckline support of the inverted head and shoulder pattern or ₹352. These two levels are the key supports which are likely to halt the fall. A reversal from here will see the resumption of the broader uptrend that has been in place since February. Medium-term investors can hold the longs and accumulate on dips near ₹355. Retain the stop-loss at ₹310.

Series of supports to limit the downside for SBI (₹246.7)

The rally in SBI has paused as expected, but well before testing the resistance at ₹264. The stock made a high of ₹260.5 and reversed sharply to close 4.6 per cent lower for the week. Immediate support is at ₹246 — the 100-week moving average. A reversal from the current levels may keep the stock range-bound between ₹245 and ₹260 in the near term. But a break below ₹245 can take SBI lower to ₹242 and ₹239 — the 21-day moving average. Further fall below ₹239 can drag it to ₹235, a key short-term support that is likely to halt the fall in the stock. Also, the broad region between ₹235 and ₹225 is a strong support zone and SBI is unlikely to decline below it. Medium-term investors can buy in small lots at current levels. Accumulate more on dips near ₹240 and ₹235. Keep the stop-loss at ₹205. A strong break above ₹260 will boost the momentum and take the stock beyond the Fibonacci retracement resistance at ₹264. Such a break will pave the way for the target of ₹275 or even higher.

Cluster of supports to limit the downside for RIL (₹1,027.7)

RIL is stuck inside the ₹1,000-1,045 range for the third consecutive week. The region between ₹1,000 and ₹985 will continue to remain as a key support zone for the stock. As long as RIL trades above this zone, there is no danger of seeing a any fresh fall. A strong break and a decisive daily close above ₹1,045 will boost the momentum. Such a break will increase the possibility of a rally to ₹1,060 or ₹1,070. Further break above ₹1,070 will take RIL to the next target of ₹1,100 or even higher 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. Such a break can take RIL lower to ₹950 or ₹935. But such a fall looks unlikely as there is a cluster of supports on the daily chart between ₹1,000 and ₹990. So there is a stronger likelihood of RIL breaking above ₹1,045 and rising to ₹1,070 or ₹1,100 levels in the coming weeks.

Bearish outlook is intact for Infosys (₹1,020.7)

Infosys witnessed a strong bounce back in the initial part of last week. But it was short-lived as the 21-day moving average, currently at ₹1,058, halted this up-move. After reaching a high of ₹1,061.95, the stock reversed sharply lower and fell almost 4 per cent from its high. The resistance around ₹1,060 mentioned last week has held well as expected and kept the bearish outlook intact. This level will continue to remain a key near-term resistance and can cap the upside in this stock. Immediate support is at ₹1,015, which is likely to be broken early this week. Such a break can take the stock lower to ₹1,000. Further fall below ₹1,000 will see Infosys tumbling to ₹950 or ₹925. The 200-week moving average at ₹925 and the 50 per cent Fibonacci retracement level are key supports. If the stock manages to reverse higher, a bounce back to ₹1,000 is possible. But a decisive close below the 200-week moving average support will increase the possibility of the downmove extending to even ₹850.

ITC retains its sideways consolidation move (₹253.7)

ITC remained range-bound for the seventh consecutive week. Within the broad ₹245-₹262 range, the stock was stuck inside a narrow range of ₹249-255 in the past week. There is no change in the view. The downside is expected to be limited to ₹245 in the short term as the presence of the 55-day moving average and a trend line support around this level makes it a strong support. Immediate resistance is at ₹255. A break above it can take it higher to ₹260. The bias continues to remain positive for ITC to break the range above ₹262 in the coming weeks. A strong close above ₹255 will be the first signal confirming of the range breakout, which will then open doors for the next targets of ₹268 and ₹270. Further break above ₹270 may target ₹290. Medium-term investors can hold the long positions and accumulate near ₹245. Retain the stop-loss at ₹228 for the target of ₹270. But if the stock breaks below ₹245, it can fall to ₹240. Further fall below ₹240 in ITC looks unlikely at the moment.

Published on August 28, 2016
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