Weekly Trading Guide

Contrary to expectations of a fall, SBI witnessed a sharp bounce in the past week. The near-term outlook is unclear. The price action will be key in deciding the next move. Key resistance is in the ₹257-260 region. If SBI manages to breach ₹260 decisively, the downside pressure will ease. Such a break will trigger a relief rally towards ₹271 — a 38.2 per cent Fibonacci retracement level — initially on the back of short covering. Further break above ₹271 will see the up-move extending towards ₹283 — a trendline as well as the 50 per cent Fibonacci retracement resistance level. A rally beyond ₹283 is unlikely as the upside is expected to be capped at this level. SBI will come under pressure again only if it breaks below ₹240 decisively. Such a break will bring the bears back into the stock. It will signal the resumption of the overall downtrend and increase the likelihood of the stock tumbling to ₹200 and ₹190 over the medium term. Traders can stay out of the stock and wait for a clear trend and a trade signal to emerge.

ITC was volatile in the past week. Though it opened with a wide gap-down, it managed to reverse sharply higher closing the gap and surged to a high of ₹265.75 on the same day. However, ITC failed to sustain and came off from this high again, giving back most of the gains made during the week. It closed on a flat note. A dip to revisit the crucial support at ₹250 is likely in the near term. If the stock manages to bounce again from ₹250, it can move higher and remain range-bound between ₹250 and ₹265 for some time. But if ITC declines below ₹250 decisively, a fresh fall to ₹247 or ₹244 is possible. As mentioned last week, a cluster of supports poised between ₹245 and ₹230 can halt the current downtrend. A strong upward reversal thereafter will mark the beginning of a fresh leg of a long-term uptrend. So, investors holding the long positions can accumulate at ₹247 and retain the stop-loss at ₹220. A strong break above ₹265 will bring fresh bullish momentum and take ITC higher to ₹270 and ₹275 thereafter.

Infosys tumbled 2.8 per cent last week. The short-term outlook has turned negative after last week’s strong fall. Immediate resistances are at ₹1,140 and ₹1,145. A break above ₹1,145 can ease the downside pressure and take the stock up to ₹1,160. Further break above ₹1,160 will increase the possibility of the stock revisiting ₹1,200 levels. If Infosys remains below ₹1,145, it can be under pressure. While below ₹1,145, a fall to ₹1,090 or ₹1,085 is likely in the short term. Further fall below ₹1,085 is less probable now. But if Infosys breaks below ₹1,085, it will indicate a double-top formation on the chart. This will increase the possibility of the stock tumbling towards ₹1,050 or even ₹1,030 over the medium term. Short-term traders with high risk appetite can go short at current levels. Stop-loss can be placed at ₹1,165 for the target of ₹1,085. Revise the stop-loss lower to ₹1,120 as soon as the stock moves down to ₹1,110. However, the fall to ₹1,050-₹1,030 will be a good buying opportunity for long-term investors.

RIL seems to lack strength to breach the psychological level of ₹900. The stock made a high of ₹910 only to close 1.1 per cent lower for the week. A crucial support is at ₹870, which is likely to be tested. If RIL manages to bounce from there, the downside pressure will ease. It will keep the broader ₹870-960 sideways range intact and increase the possibility of the stock bouncing back to ₹900 and ₹920 initially. Further break above ₹920 will ease the downside pressure and take the stock higher to ₹960 — the upper end of the range in the short term. On the other hand, if RIL breaks below ₹870, it can fall to ₹860 or ₹855. A trend line as well as the 200-day moving average supports are poised between ₹860 and ₹855. A strong break below ₹855 will bring renewed pressure for the stock. Such a break will increase the likelihood of the stock tumbling towards ₹820 or even ₹800 on the back of profit-booking. This down move below ₹855 could be swift as stop-loss orders are likely to be triggered below this level.

Tata Steel managed to sustain above the key support level of ₹550 last week. However, the price action on the chart reflects that the stock lacks strong buying interest. It made a high of ₹598.85 and has come off from it. A revisit to ₹550 is likely in the near term. A bounce from ₹550 can take it back to ₹600 again. In such a scenario, a range-bound move between ₹550 and ₹600 can be seen for some time. If Tata Steel manages to breach ₹600, the downside pressure can ease and a rally to ₹635 is possible. Further break above ₹635 looks unlikely at the moment as the bias continues to remain bearish. As such, an eventual break below ₹550 can take Tata Steel lower to ₹535. A strong break below ₹535 will increase the likelihood of the stock tumbling towards ₹510 or ₹500 over the medium term. Short-term traders with high risk appetite can go short. Keep the stop-loss at ₹605 for the target of ₹515. Revise the stop-loss lower to ₹555 as soon as the stock moves down to ₹545.

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