Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on July 08, 2018 Published on July 07, 2018

SBI (257.45)


Near-term outlook is unclear for SBI

SBI was stuck in a narrow range between ₹254 and ₹262 last week. The near-term outlook is unclear. Support is at ₹253 and resistance at ₹262. A break-out on either direction of ₹253 or ₹262 will determine the future trend. If SBI sustains above ₹253 and breaks above ₹262, the downside pressure would ease. Such a break can take the stock higher to ₹267 or ₹270 in the coming days. The region between ₹270 and ₹272 is a strong resistance. The outlook will turn positive only if SBI breaks above ₹272 decisively. The stock can then target ₹280 and ₹285. But such a strong break and a rally above ₹272 look less probable at the moment. On the other hand, if SBI declines below ₹253, it can dip to ₹249 initially. Further break below ₹249 can drag the stock to ₹243 or even ₹240 thereafter. Traders having a high risk appetite with a short-term view can go short on rallies at ₹266 and ₹269. Stop-loss can be placed at ₹275 for the target of ₹245. Revise the stop-loss lower to ₹263 as soon as the stock moves down to ₹258.

ITC (₹272.3)

Downside pressure eases for ITC

After being range-bound between ₹259 and ₹267 for two weeks, ITC broke the range above ₹272 last week. The stock surged 2.3 per cent last week and closed on a strong note. The price action on the weekly chart indicates that the stock lacks strong sellers to drag it below ₹260 decisively. This has eased the danger of the stock tumbling towards ₹250. The strong rally in the past week has turned the outlook positive. The level of ₹267 will now serve as a strong support for the stock. Key resistances are near current levels at ₹274 and ₹277. Inability to break above ₹277 can take the stock lower to ₹272 and ₹270. However, intermediate dips are likely to find fresh buyers coming into the market. The stock can remain range-bound between ₹267 and ₹277 in that scenario. However, the bias will continue to remain bullish. An eventual break above ₹277 will boost the momentum. Such a break will increase the likelihood of the stock rallying to ₹285 and ₹289 in the short term. Investors can hold their long positions and retain the stop-loss at ₹220.

Infosys (₹1,284.5)

Infosys can dip before moving up

Infosys was volatile last week. The stock surged, breaking above the resistance at ₹1,320, and made a high of ₹1,358. However, it failed to sustain higher and tumbled over 6 per cent from the high to make a low of ₹1,269, before closing the week at ₹1,284. The psychological level of ₹1,300 is a key resistance to watch. A strong break above it is needed for the downside pressure to ease. If Infosys manages to surpass ₹1,300, it can revisit ₹1,350 levels in the coming days. But such an up-move to ₹1,300 can happen at a slower pace as the fall in the past week was sharp. On the other hand, if Infosys fails to breach ₹1,300, it can continue to trade under pressure. Below ₹1,300, there is a strong likelihood of the stock falling to ₹1,250 or ₹1,235 in the short term. Fresh buying interest is likely to emerge at lower levels and can limit the downside in the stock. Significant support is around ₹1,200 and a fall below it is unlikely at the moment. Both medium- and long-term investors can hold on to their long positions.

RIL (₹976.5)

Resistances cap the upside in RIL

RIL was volatile last week. It surged to make a high of ₹1,008.5, but failed to sustain above the psychological level of ₹1,000. The stock fell sharply from the week’s high, giving back almost all the gains and closed on a flat note for the week. As mentioned last week, RIL has to breach ₹1,000 decisively to turn the outlook positive. A strong break above ₹1,000 will increase the likelihood of the stock targeting ₹1,020 and ₹1,030 levels again. But it will remain under pressure if it continues to trade below ₹1,000. In such a scenario, there is a strong likelihood of the stock breaking below ₹945 — the 100-day moving average support — and fall to test the 200-day moving average support level of ₹926. A bounce from ₹926 can trigger a relief rally to ₹950 and ₹970 thereafter. But a break below ₹926 can drag RIL to ₹910 and ₹900. The region around ₹900 is a crucial medium-term support. As such, the price action around this support, which will decide the future trend, will need a close watch.

Tata Steel (₹554.1)

Tata Steel in danger of fresh fall

Tata Steel began the week on a positive note and surged to a high of ₹586.5. However, the positive momentum was short-lived and stock reversed sharply lower from the high of ₹586.5. It tumbled over 6 per cent from its high to make a low of ₹547. The 55-day moving average resistance at ₹580 has capped the upside in the stock. A dip to test the crucial support level of ₹540 is possible in the coming days. If Tata Steel manages to bounce from ₹540, it can move up to ₹560 and ₹570. In such a scenario, the stock can remain in a broad sideways range of ₹540 and ₹600 for some time. But the price action indicates that the stock lacks fresh buyers to take it up decisively. This leaves the possibility high of the stock breaking below ₹540 in the coming days. Such a break can take it to ₹529 initially. Further break below ₹529 can trigger a sharp sell-off in the stock. It will then increase the likelihood of the stock tumbling to ₹480 or ₹475 over the medium term.

Published on July 07, 2018
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