Technical Analysis

Weekly trading guide

Gurumurthy K | Updated on April 08, 2018 Published on April 08, 2018

SBI forms a bullish reversal pattern (₹259.8)

After an initial struggle, SBI managed to breach decisively the 21-day moving average (₹250) resistance towards the end of the week. The stock was up 3.8 per cent last week and has closed on a strong note. The level of ₹250 will now be a good support for the stock. The price action on the chart since March indicates the formation of an inverted head and shoulder pattern. This is a bullish reversal pattern. The neckline resistance of this pattern is at ₹262. A strong break above ₹262 will confirm this pattern and take SBI higher to ₹268 initially. Further break above ₹268 will pave way for the next targets of ₹275 and ₹280. On the other hand, if SBI fails to rise past ₹262 in the coming days, it can fall back towards ₹250 levels again. A break below ₹250 can then drag the stock lower to ₹240 levels again. Traders can go long on a break above ₹262. Stop-loss can be placed at ₹252 for the target of ₹280. Revise the stop-loss higher to ₹265 as soon as the stock moves up to ₹268.

Near-term view is positive for ITC (₹260.6)

ITC remained broadly in a sideways range all through last week. The near-term view is positive. A rise to test the ₹264-₹266 resistance region is possible in the coming days. Whether ITC breaks above ₹266 or not will be key in deciding the next move. A strong break above ₹266 will bring renewed strength to the stock. Such a break can then trigger a fresh rally to ₹274. The rally to ₹274 will also mark the end of the downtrend that has been in place since February. On the other hand, if ITC fails to breach ₹266 and reverses lower in the coming days, it can fall to ₹260 or ₹257 again. The region between ₹257 and ₹255 is a key near-term support. A bounce from this support zone can take the stock ITC higher again and keep it range-bound between ₹255 and ₹266 for some time. But if ITC declines below ₹255, it can fall to test the crucial support level of ₹250. A break below it can drag it to ₹250. Investors can hold the long positions and retain the stop-loss at the level of ₹220.

Short-term outlook is negative for Infosys (₹1,129.3)

Infosys remained subdued and range-bound between ₹1,120 and ₹1,150. Key resistances are at ₹1,147 and ₹1,155. As long as the stock remains below these resistances, a fall to ₹1,090 cannot be ruled out. A bounce from ₹1,090 will ease the pressure and take Infosys higher to ₹1,150 levels again. In such a scenario, the stock can remain range bound between ₹1,090 and ₹1,200 for sometime. But if Infosys breaks below ₹1,090, a fall to ₹1,050 or even ₹1,030 is possible over the medium-term. But further fall below the ₹1,050-₹1,030 support zone is unlikely as fresh buyers can emerge in the market. As mentioned last week, a fall to ₹1,050-₹1,030, if seen, will be a good buying opportunity for long-term investors. Traders who have taken short positions last week can hold it. Retain the stop-loss at ₹1,165 for a revised target of ₹1,105. Move the stop-loss lower to ₹1,125 as soon as the stock moves down to ₹1,115. Medium and long-term investors can hold the long positions.

Near-term view is positive for RIL (₹909.7)

RIL snapped its four-week fall. The stock surged 2.8 per cent last week. Key resistances are at ₹921 and ₹928, which are likely to be tested in the near term. Inability to breach these hurdles can pull the stock lower to ₹900 or ₹890 levels again. But if RIL manages to breach ₹928 decisively, it can gain momentum. Such a break will increase the likelihood of the stock rallying towards ₹960 over the short term. A strong break above ₹928 will boost the momentum. Such a break can take RIL higher to ₹960 in the short term. The level of ₹960 is a crucial resistance for RIL. A strong break above it will pave way for the next targets of ₹1,000 and ₹1,020 over the medium. But if RIL reverses lower from ₹960, it can fall back to ₹920 or ₹900 levels again. In such a scenario, the broader ₹870-₹960 range will remain intact. Short-term traders with high risk appetite can go long at current levels. Keep the stop-loss at ₹885 for the target of ₹955. Revise the stop-loss higher to ₹920 as soon as the stock moves up to ₹935.

Resistance to cap the upside in Tata Steel (₹586.3)

Tata Steel remained lower but in a narrow range in the past week. The stock has been consolidating over the last couple of weeks within its overall downtrend. The level of ₹600 is a key near-term resistance. A strong break above it is needed for the downside pressure to ease. Such a break can trigger a corrective rally towards ₹630. But the upside is expected to be capped as fresh sellers may emerge at higher levels. As such, a further rally beyond ₹630 looks less probable now as the bias continues to remain bearish on the stock. A revisit of ₹550 is likely in the coming days. A break below ₹550 can take the stock lower to ₹535 initially. Further break below ₹535 will then increase the likelihood of the stock tumbling towards ₹510 or even ₹500 over the medium term. Traders who have taken short positions can hold it. Retain 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.

Gurumurthy K

Published on April 08, 2018
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