Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on May 20, 2018 Published on May 20, 2018

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SBI (₹239.2)

SBI began the week on a positive note, but it was short-lived. The stock touched a high of ₹257.2 and came off sharply from there to close 4.7 per cent lower for the week. The near-term view is bearish. A fall to test the crucial support level of ₹231 is likely. If SBI manages to bounce from ₹231, the downside pressure would ease. A relief rally to ₹250 or ₹255 is possible then. Also, a range-bound move between ₹231 and ₹255 is possible for some time in such a scenario. But if SBI breaks below ₹231 decisively, it can come under renewed pressure. Such a break will increase the likelihood of the stock tumbling towards ₹200 or ₹195 over the medium term. The region around ₹195 is a strong long-term support which can halt the downtrend that has been in place since November last year. Traders with a medium-term perspective can go short at current levels and on rallies at ₹245. Stop-loss can be placed at ₹265 for the target of ₹200. Revise the stop-loss lower to ₹240 as soon as the stock moves down to ₹225.

ITC (₹282.1)

ITC was volatile last week. The stock has been stuck in a sideways range between ₹276 and ₹290 over the last three weeks. Last week’s candle on the weekly chart reflects indecisiveness in the market. This leaves the short-term outlook unclear for the stock. A breakout on either side of ₹276 or ₹290 will decide the next move. If ITC declines below ₹276, it can fall to test the ₹269-₹267 support region. A bounce from this support zone will ease the downside pressure and take the stock higher to ₹280 and ₹285 again. But a strong break below ₹267can drag the stock lower to ₹260 or even ₹255. On the other hand, if ITC manages to sustain above ₹276 in the coming days and breaches ₹290, it can move higher to ₹296 initially. Inability to break above ₹296 can trigger a pull-back move to ₹289. But a strong break above ₹296 will see the stock rallying to ₹303 or ₹305. Such a rally will also mark the end of the downtrend that has been in place since last July. Long-term investors can hold the long positions.

Infosys (₹1,183.7)

Infosys has been testing the psychological level of ₹1,200 over the last four consecutive weeks. However, the stock seems to be lacking fresh buyers to take it decisively above ₹1,200. It has been facing strong resistance around ₹1,210. A strong break above this hurdle is needed for Infosys to gain fresh momentum. Such a break will see Infosys testing the previous highs of ₹1,278 levels. It will also increase the possibility of the stock targeting ₹1,350 and ₹1,375 levels over the medium term. On the other hand, if Infosys continues to remain below ₹1,200, a fall to ₹1,160 is possible in the near term. It will keep the broader ₹1,100-₹1,200 sideways range intact. The stock has been stuck in this range since January. Further break below ₹1,160 can drag the stock to ₹1,140 or ₹1,135. A bounce from ₹1,135 can trigger a relief rally to ₹1,160 or ₹1,170. But a strong break below ₹1,135 will see Infosys falling towards ₹1,100. Further fall below ₹1,100 is unlikely. Both medium- and long-term investors can hold the long positions.

RIL (₹933.4)

RIL tumbled over 5 per cent last week. The stock hovers above an immediate support level of ₹929 — the 21-week moving average. This support has been limiting the downside over the last four weeks. If RIL manages to sustain above this support and reverse higher, it can move up to test ₹1,000 levels again. Inability to break above ₹1,000 can continue to keep the stock range-bound between ₹929 and ₹1,000 for some more time. But a strong break above ₹1,000 will increase the likelihood of the stock targeting ₹1,030 or ₹1,035. The region between ₹1,030 and ₹1,035 is a crucial medium-term resistance for the stock. Whether RIL breaks above ₹1,035 or not will be key in deciding the next move. On the other hand, if RIL breaks below the immediate support level of ₹929, it can fall to ₹900 or ₹890 in the coming days. A crucial medium-term trend deciding support is poised around ₹890. A decisive weekly close below ₹890 may trigger a sharp corrective fall to ₹850. So the price action around ₹890 will need a close watch.

Tata Steel (₹591.5)

Tata Steel surged, breaking above the key ₹615-₹620 resistance region last week, but failed to sustain higher. The stock made an intra-week high of ₹636.3 and reversed sharply lower, giving back all the gains made and closed 2.5 per cent lower for the week. Technically, the 38.2 per cent Fibonacci retracement resistance at ₹631 has halted the up-move and triggered the reversal. This indicates that the downtrend that has been in place since January is intact. Immediate resistance is inbetween ₹600 and ₹605. Inability to bounce from the current levels and breach this hurdle can continue to keep the stock under pressure. A fall to ₹570-₹565 is likely. If Tata Steel manages to bounce from ₹565 to ₹570, a relief rally to ₹600 is possible. But a break below ₹565 can drag the stock to ₹550. Traders with high risk appetite can go short on rallies at ₹598 and ₹605. Stop-loss can be placed at ₹615 for the target of ₹570. Revise the stop-loss lower to ₹590 when it moves down to ₹580.

Published on May 20, 2018
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