Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on April 15, 2019 Published on April 13, 2019

SBI (₹315.3)

SBI fell sharply by about 3 per cent in the initial part of last week. However, it found support in the ₹310-308 region and oscillated between ₹308 and ₹320 thereafter. The level of ₹310 will be crucial to watch. A decisive close below ₹310 can drag SBI initially lower to ₹305 — the next important support level. A bounce from ₹305 can trigger a relief rally to ₹310. A range-bound move between ₹305 and ₹310 is possible in that scenario.


But a break below ₹305 will increase the likelihood of the fall extending to ₹300 or even ₹290 on profit-booking. On the other hand, if SBI manages to sustain above ₹310, a bounce to test the key ₹320-325 resistance region is likely. As mentioned last week, a decisive weekly close above ₹325 is needed for SBI to gain fresh momentum and target ₹350 over the medium term. Traders holding long positions at ₹315 and ₹308 should remain cautious. Retain the stop-loss at ₹295 for the target of ₹350. Move the stop-loss higher to ₹317 as soon as the stock moves up to ₹323 levels.


ITC (₹305.6)

After oscillating around ₹295 almost through the week, ITC surged over 3 per cent on Friday and closed on a strong note. Last week’s rally has taken the stock decisively above the key resistance level of ₹303. The short-term outlook is bullish. The region between ₹303 and ₹300 will now act as a strong support for the stock. The downside is likely to be limited to ₹300 now. ITC can move up to ₹310 and ₹315 in the short term.

A further break above ₹315 will then increase the likelihood of the stock’s rally extending to ₹320 and ₹330 levels over the medium term. The bullish outlook will get negated only if ITC declines below ₹300. In such a scenario, a fall to ₹290 is possible on profit-booking. But such a fall looks less probable as dips to ₹300 are likely to find fresh buyers coming into the market. Investors can hold the long positions taken at ₹282, ₹278 and ₹272 with a revised stop-loss at ₹301. Move the stop-loss higher to ₹305 as soon as the stock reaches ₹308 levels. Traders cab consider booking profits at around ₹310.


Infosys (₹747.8)

Infosys reversed lower after rallying over the last four weeks. The stock was down 1.1 per cent for the week. Infosys seems to be lacking fresh buyers to take it beyond the ₹770-775 resistance region. An immediate support is at ₹740 which is likely to be tested in the near term. A bounce from this support can take Infosys higher to the ₹770-775 region again.


A range-bound move between ₹740 and ₹775 is possible. A strong break above ₹775 is needed to reinforce the up-move and take the stock to ₹800. On the other hand, if the stock breaks below the immediate support at ₹740, it can come under pressure. In such a scenario, a fall to ₹720 and ₹710 is possible in the short term on profit-booking. The region between ₹710 and ₹700 is a strong support zone, which is likely to limit the downside. A fall below ₹700 looks less probable now. Broadly, Infosys can trade sideways in the band between ₹700 and ₹775 in the short term. A breakout on either side of ₹700 or ₹775 will then decide the direction of the next move.


RIL (₹1,341.9)

RIL inched lower for the second consecutive week. The stock was down about one per cent. Though it managed to reverse higher from the week’s lower at around ₹1,320, the bounce-back move seems to be lacking strength. A key resistance is in the ₹1,350-1,355 region. RIL has to decisively breach ₹1,355 to ease the downside pressure. Such a break can take the stock higher to ₹1,375 and ₹1,400 levels again.

But the weak bounce-back move last week leaves the possibility high of the stock reversing lower from the 1,350-1,355 resistance region. Such a pull-back move will take RIL lower to ₹1,325 and ₹1,315. A further break below 1,315 will then increase the likelihood of the stock extending its down move to ₹1,300. The region between ₹1,315 and ₹1,300 is a key support. The outlook will turn negative only if RIL declines below ₹1,300. A pull-back from the ₹1,350-1,355 resistance zone in the coming days will increase the possibility of the stock declining below ₹1,300. In such a scenario, a fall to ₹1,250 is possible on profit-booking.


Tata Steel (₹533.7)

Tata Steel tumbled 3 per cent last week, giving back most of the gains made in the week earlier. The stock is likely to dip further in the near term to ₹525 – a significant support. There is a strong likelihood of the stock reversing higher from ₹525. Such a bounce will keep the overall uptrend intact and take the stock higher to ₹550 and ₹560.

A further break above ₹560 will then increase the likelihood of the stock extending its up-move to ₹570 and ₹575. On the other hand, the outlook will turn negative if Tata Steel declines below ₹525. In such a scenario, a fall to ₹510 and ₹500 is possible. But the indicators on the chart suggest that Tata Steel is likely to sustain above ₹525. The 55-day moving average is on the verge of crossing the 100-day moving average. This is a bullish sign, indicating that the downside could be limited. As such, Tata Steel can reverse higher after testing ₹525.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on April 13, 2019

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