Technical Analysis

Weekly trading guide

Gurumurthy K | Updated on March 25, 2018

SBI is vulnerable for further fall (₹234.6)

The ongoing scams and frauds in the banking sector is keeping stocks in this space under pressure. SBI tumbled about 7 per cent breaking below the crucial support level of ₹241. The fall last week indicates that the downtrend is intact and is gaining strength. Key resistances are at ₹241 and ₹250, which can cap the upside in the short term. A fall to ₹226 — the 61.8 per cent Fibonacci retracement support level is likely in the short-term. A bounce back-move to ₹241 from ₹226 cannot be ruled out. However, the upside is expected to be capped as fresh sellers may emerge at higher levels and cap the upside. An eventual break below ₹226 will then increase the likelihood of the stock tumbling towards ₹200 or 190 over the medium term. Traders with a medium-term perspective can go short at current levels and at ₹240. Keep the stop-loss at ₹248 for the target of ₹205. Revise the stop-loss lower to ₹232 as soon as the stock moves down to ₹227. The downside pressure will ease only if SBI breaches ₹250 decisive. But that looks unlikely in the near term.

Short-term view is negative for ITC (₹256.3)

Weakness in the broader markets dragged ITC below the key support level of ₹258 in the final trading session of the week. The ₹258-₹259 resistance region can cap the upside in the near term. As long as the stock trades below ₹259, a fall to ₹251 or ₹250 is likely. Short-term traders can go short at the current levels and at ₹258. Stop-loss can be placed at ₹259.5 for the target of ₹251. Revise the stop-loss lower to ₹255 as soon as the stock moves down to ₹253. A bounce-back thereafter from ₹250 can ease the downside pressure and take the stock higher to ₹257 or ₹258 again. But if ITC declines below ₹250 decisively, the downmove can then extend to ₹247 or ₹244 over the medium term. But such a fall will be a good buying opportunity for the medium and long-term investors. Cluster of supports are poised between ₹245 and ₹230, which can halt the downtrend. A strong upward reversal thereafter will mark the beginning of a fresh leg of a long-term uptrend. Long-term investors can hold the long positions and accumulate at ₹247. Retain the stop-loss at ₹220.

Infosys consolidated within its uptrend (₹1,167.4)

The ₹1,140-₹1,130 region continues to provide strong support for Infosys. The stock made a low of ₹1,140 and has reversed higher from there. The ₹1,130-₹1,200 sideways range remains intact. Intermediate resistance is at ₹1,177. A break above it can take Infosys higher to ₹1,200. Inability to break above ₹1,200 can pull the stock lower and continue to keep it in the ₹1,130-₹1,200 range. A strong break above ₹1,200 is needed for Infosys to gain fresh momentum. Such a break can take it higher to ₹1,210. Further break above ₹1,210 will see the stock rallying to ₹1,250 and even higher thereafter. On the other hand, Infosys will come under pressure if it breaks below ₹1,130. Such a break will see an intermediate dip to ₹1,100. Further fall below ₹1,100 is less probable as fresh buyers may emerge at lower levels. Also, the overall bias is bullish for Infosys to breach ₹1,200 and extend its upmove over a medium and long term. So any intermediate fall below ₹1,130 will be a good buying opportunity. Both medium- and long-term investors can hold the long positions.

Immediate outlook is unclear for RIL (₹892.8)

RIL was stuck in a narrow range in the past week. The stock was range-bound between ₹887 and ₹911 and has closed on a slightly negative note. The immediate outlook is unclear. Traders can stay out of the stock until a clear trend and a trade signal emerges. As long as the stock remains below ₹900, a fall to test the crucial support at ₹870 is likely. A break below ₹870 can drag RIL to ₹860 and ₹850 thereafter. But if the stock manages to sustain above the support at ₹870 and reverses higher, the downside pressure will ease. Such a reversal will indicate that the broader ₹870-₹960 sideways range is intact. The stock has been stuck in this range for a prolonged period of time since last November. Intermediate resistance is at ₹900 and cluster of resistances are poised between ₹920 and ₹930. A strong break above ₹930 will pave way for a fresh rally to ₹960. RIL will gain fresh bullish momentum only if it breaks above ₹960 decisively. Such a break will increase the likelihood of the stock rallying towards ₹1,000 or even higher thereafter.

Downtrend intact for Tata Steel (₹566.6)

As expected, Tata Steel extended its fall for the third consecutive week. The stock was down 5.6 per cent last week. Tata Steel has tumbled 16 per cent over the last three weeks. Immediate support is at ₹550. But the stock is vulnerable to break below this level in the coming days as the downtrend has gathered momentum and any upmove would find fresh selling interest coming into the stock. Such a break can drag it to ₹540 or ₹530. The region between ₹540-₹530 is a strong medium-term support. Since the stock has been falling continuously over the last few weeks, a relief rally from the ₹540-₹530 support zone cannot be ruled out. An upward reversal from this support zone can take the stock higher to ₹585 or even ₹600. But if Tata Steel breaks below ₹530 decisively, it can tumble to ₹500 or even ₹480 over the medium term. Traders can hold the short positions. Revise the stop-loss lower to the level of ₹585. Move the stop-loss further lower to ₹575 as soon as the stock dips to ₹555. Book profits at ₹545.

Published on March 25, 2018

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