Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on August 20, 2018 Published on August 19, 2018

Supply side The Centre and SEBI need to do more to increase the supply of quality stocks   -  Bloomberg

SBI (302)

SBI opened the week on a negative note with a wide gap-down at ₹296 and fell to a low of ₹290.5 on Thursday. However, the stock reversed sharply higher on Friday, recovering most of the loss. The bullish outlook is intact. A near-term support is at ₹298. As long as the stock remains above this support, an up-move to ₹310 is possible. Inability to breach ₹310 can pull the stock lower and keep it range-bound between ₹290 and ₹310 for some time. On the other hand, a strong break above ₹310 can take SBI higher to ₹322 – a crucial short-term resistance. Further decisive break above ₹322 will pave the way for the next targets of ₹350 and ₹370 over the medium term. The bullish outlook will get negated only if the stock declines below ₹285 decisively. But the cluster of supports in between ₹290 and ₹285 leaves the possibility of the stock breaking below this zone, lower. Medium-term traders who have taken long positions can hold it. Retain the stop-loss at ₹283. Move the stop-loss higher to ₹301 as soon as the stock moves up to ₹318.

ITC (₹313.7)

ITC snapped its two-week sideways consolidation last week. The stock has surged, breaking above a key resistance level of ₹308 and has closed 3 per cent higher for the week. The rally in the past week has strengthened the uptrend. The region between ₹310 and ₹308 will now act as a strong near-term support. The current up-move can extend to test the next key resistance at ₹320. Inability to break ₹320 can pull the stock down to ₹310. But a strong break above ₹320 will pave way for the next target of ₹327 and ₹330. The levels of ₹320 and ₹330 are crucial resistances. The stock will gain further momentum only if it breaks above ₹330 decisively. Such a break will increase the likelihood of the stock targeting ₹360 over the medium term. Investors can hold the long positions and revise the stop-loss higher to ₹265. Short-term traders who have taken long positions at ₹297 can hold it with a revised stop-loss at ₹303. Move the stop-loss further higher to ₹308 as soon as the stock moves up to ₹321, and book profits at ₹330.

Infosys (₹1,431.3)

Infosys surged over 3 per cent last week. This brings the three-week sideways consolidation move, between ₹1,335 and ₹1,390, to an end. Though the overall uptrend is intact, crucial resistances are ahead. Key long-term trend line resistances are at ₹1,450 and ₹1,470. A test of these resistances cannot be ruled out in the near term. The price action, thereafter, will need a close watch. The next trend will depend on whether Infosys breaks above these hurdles or not. If Infosys manages to breach ₹1,470, the current upmove can extend to ₹1,500 or even higher thereafter. On the other hand, a pull-back from ₹1,450 or ₹1,470 can take Infosys lower to ₹1,390 or ₹1,380 initially. Further break below ₹1,380 will then increase the likelihood of the stock extending its fall to ₹1,320 on the back of profit-booking. Since the stock has rallied sharply in a short span of time, the possibility of the stock reversing lower from the ₹1,450-₹1,470 region is high. Both medium- and long-term investors who are holding long positions should look to book partial profits at ₹1,450.

RIL (₹1,203.4)

RIL was stuck in a narrow range between ₹1,183 and ₹1,216 last week. The near-term outlook is mixed. A break-out on either side of the immediate support at ₹1,180 or resistance at ₹1,225 will decide the next move. If RIL breaks below ₹1,180, it can dip to ₹1,167 initially. Further break below ₹1,167 can drag it to ₹1,150 or ₹1,140 in the short term. The region between ₹1,150 and ₹1,140 is a strong short-term support and a break below ₹1,140 looks less probable at the moment. But if RIL declines decisively below ₹1,140, it can tumble to ₹1,070 thereafter on the back of profit-booking. On the other hand, if RIL sustains above ₹1,180 in the coming days and breaks above ₹1,225, it can gain momentum. Such a break will then pave the way for the next target of ₹1,310 over the next few weeks. Short-term traders who have taken long positions on dips at ₹1,190 last week can hold it. Accumulate at ₹1,165. Keep the stop-loss at ₹1,125 for the target of ₹1,300. Revise the stop-loss higher to ₹1,210 as soon as the stock moves up to ₹1,245.

Tata Steel (₹580.6)

Tata Steel was broadly range-bound and closed marginally higher last week. The support at ₹565 is holding well. An up-move to test the key ₹595-₹600 resistance region is likely in the near term. Inability to breach ₹600 can drag the stock lower to ₹570 or ₹565 again and keep it range-bound between ₹565 and ₹600 for some time. However, the indicators on the charts are giving positive signals. The 21-day moving average is on the verge of crossing over the 55-day moving average. This is a positive signal, indicating that the downside could be limited in the near term. It also leaves the possibility high of the stock breaking above ₹600 in the coming days. Such a break can take Tata Steel higher to ₹620 or ₹630 thereafter. As mentioned last week, the region between ₹620 and ₹630 is a crucial resistance. Whether Tata Steel manages to breach this hurdle or not will decide the next move. A strong break above ₹630 is needed for an initial confirmation that the downtrend than has been in place since February has ended.


Published on August 19, 2018

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