Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on March 11, 2018 Published on March 11, 2018

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SBI (253.1)

As expected, SBI fell breaking below the 200-week moving average (₹260) support last week. The stock tumbled to a low of ₹244.4, but managed to recover some of the loss before closing 3.6 per cent lower for the week. The crucial support at ₹245 is holding well as of now. Since the stock has been falling continuously over the last few weeks, as long as it sustains above ₹245, a corrective rally in the short term cannot be ruled out. A strong break above the immediate resistance in the ₹258-₹260 zone can trigger this corrective rally, targeting ₹270 in the short term on the back of profit booking. But if SBI fails to breach ₹260 and remains below it, a revisit of ₹245 is possible. In such a scenario, a range-bound move between ₹245 and ₹260 can be seen for some time. The stock will come under renewed pressure if it breaks below ₹245 decisively. Such a break can take it to ₹238 initially. Further break below ₹238 will then increase the likelihood of the stock tumbling towards ₹205 or ₹200 over the medium term.

 

 

 

ITC (₹259.4)

ITC fell breaking below the key support level of ₹262 last week. Though the stock has bounced from its intra-week low of ₹253.4, the muted price action of this recovery move indicates lack of strength. Strong resistance is in the ₹263-₹266 region. ITC should surpass ₹266 decisively to ease the downside pressure. In such a scenario, the stock can rally to ₹270 and ₹275 again. But the indicators on the chart suggest a lower possibility of the stock breaking above the ₹263-₹266 resistance zone. Immediate support is at ₹257. A strong break below it can drag the stock lower to ₹250 in the coming days. A break below ₹250 will then increase the likelihood of the fall extending towards ₹244. Further fall below ₹244 looks less probable at the moment. Short-term traders can go short on rallies at ₹262 and ₹265 with a stop-loss at ₹268 for the target of ₹252. Revise the stop-loss lower to ₹259 as soon as the stock moves down to ₹256. Long-term investors, on the other hand can hold the long positions and retain the stop-loss at ₹220.

Infosys (₹1,163.4)

Though, Infosys is stuck in a sideways range for more than two weeks the price action keeps the bias positive. Inability to break above ₹1,169 can keep the stock range-bound between ₹1,130 and ₹1,169 for some time. But a decisive break above ₹1,169 can boost the momentum and take the stock higher to ₹1,200 initially. It will also increase the possibility of the stock breaching the psychological ₹1,200 mark and targeting ₹1,250 or even higher levels over the medium term. The 21-day moving average at ₹1,138 and a trend line at ₹1,130 are the key supports to watch. The stock will come under pressure only if it breaks below ₹1,130 decisively. Such a break, though less likely, will increase the possibility of the stock falling towards ₹1,110 and ₹1,100 in the short term. The region between ₹1,100 and ₹1,085 is a strong support for Infosys. A strong fall breaking below ₹1,085 is unlikely as fresh buyers are likely to emerge at lower levels and limit the downside. Both long and medium-term investors can hold the long positions.

RIL (₹912)

RIL fell sharply last week after failing to extend its up-move beyond the key resistance at ₹960. The stock tumbled over 6 per cent intra-week and made a low of ₹888.3. However, it managed to bounce from this low recovering some of the loss and closed 3.7 per cent lower for the week. The broader ₹870-₹960 sideways range within which the stock has been trading over the last few months, remains intact. The immediate outlook is unclear. Cluster of moving average (21-, 100- and 55-day moving average) resistances are poised in between ₹922 and ₹928. If RIL manages to break above this resistance cluster, it can rally again towards ₹950 and ₹960 — the upper end of the range. But inability to break above the ₹922-₹928 resistance zone and a pull-back move in the coming days can keep the stock under pressure. In such a scenario, RIL can fall below ₹900 and test ₹880 and ₹870 — the lower end of the range. Traders can continue to stay out of this stock until a clear trend and a trade signal emerges.

Tata Steel (₹605.6)

Contrary to our expectation, Tata Steel tumbled breaking below ₹630 last week. The stock plummeted 10 per cent in the past week and the stop-loss levels on the long positions have been breached. The uptrend that has been in place since 2016 is under threat now and initial signs of a trend reversal are emanating on the charts. The stock has closed below the 200-day moving average for the first time in two years. Cluster of resistances in between ₹635 and ₹650 can cap the upside. Intermediate bounces may find fresh sellers coming into the market at higher levels in the above-mentioned resistance zone. As long as the stock remains below ₹650, the outlook will remain bearish and a fall to ₹580 cannot be ruled out. A strong break below ₹580 will increase the possibility of the stock tumbling towards ₹555. Short-term traders can go short on rallies at ₹630 and ₹650. Stop-loss can be placed at ₹685 for the target of ₹560. Revise the stop-loss lower to ₹605 as soon as the stock moves down to ₹585.

Published on March 11, 2018
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