Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on May 04, 2019 Published on May 04, 2019

SBI (₹309.15)

SBI was stuck in a sideways range between ₹303.5 and ₹315.5 for the second consecutive week. The near-term outlook continues to remain unclear. A key support is at ₹302 and resistance at ₹315. A breakout on either side of ₹302 or ₹315 will decide the direction of the next move. Until then, SBI can continue to consolidate in a sideways range. If it manages to breach ₹315, the downside pressure will ease and the stock can move up to ₹320-321. A strong break and a decisive close above ₹321 will confirm the end of the corrective fall that has been in place since April. Such a break will boost the momentum and take SBI to ₹330-335 thereafter. But if SBI reverses lower from ₹321, it can dip to ₹315 again. On the other hand, if SBI breaks the current range below ₹302, the downside pressure will increase. Fresh selling can drag the stock lower to ₹295 and ₹293 in the near term. A further break below ₹293 will then increase the likelihood of the stock tumbling towards ₹285 or even ₹280 over the medium term.

ITC (₹303.6)

ITC has been range-bound between ₹299 and ₹310 over the last three weeks. The 21-day moving average around ₹300 has been limiting the downside well. A strong break and a decisive close below it will mark the end of the sideways consolidation. Such a break can trigger a fall to ₹295-294. A bounce thereafter can trigger a corrective rally to ₹300 or ₹303. But a further break below ₹294 will then increase the likelihood of the fall extending to ₹290 or even ₹285 thereafter. On the other hand, if ITC breaks the current range above ₹310, it can inch up to ₹312-313 — a crucial long-term resistance zone. Inability to rise past ₹313 can pull ITC lower to ₹305 and ₹300 again. But a strong break above ₹313 will trigger a fresh rally to ₹317 and ₹323 over the medium term. The bias on the chart is positive for ITC to break the current ₹299-310 range on the upside and move up to ₹317 and ₹323. Such an up-move will also keep the long-term outlook bullish for the stock to target ₹350 and ₹36.

Infosys (₹723.7)

Infosys surged over 2 per cent intra-week, but failed to sustain itself at higher levels. The stock made a high of ₹753 and reversed sharply lower, giving back all the gains. It closed 1.8 per cent lower for the week. A near-term dip to ₹712-710 is possible this week. A further fall below ₹710 is less probable. A bounce from the ₹712-710 support zone can take Infosys initially up to ₹740 or ₹755. A further break above ₹755 will then increase the likelihood of the stock extending its up-move to ₹770 and ₹775. Infosys has been broadly range-bound between ₹705 and ₹775 since mid-January. The stock is likely to retain this range for some time. A breakout on either side of ₹705 or ₹775 will decide the next move. A break below ₹705 can take the stock initially lower to ₹699. A further break below ₹699 will increase the downside pressure and take Infosys to ₹680 or even lower levels thereafter. On the other hand, if Infosys breaks above ₹775 decisively, a fresh rally to ₹785-790 is possible. In such a scenario, the overall uptrend will remain intact.

RIL (₹1,407)

RIL inched higher for the third consecutive week. The stock was up 1.1 per cent last week. It has surged about 5 per cent over the last three weeks. The near-term outlook is bullish. Immediate support is at ₹1,400. As long as the stock stays above this support, there is a strong likelihood of it moving up in the coming days. Resistance is in the ₹1,420-₹1,425 region. An inability to breach this hurdle can keep the stock in a narrow range between ₹1,400 and ₹1,425 for some time. But the bias will continue to remain positive. An eventual break above ₹1,425 will boost the momentum. Such a break will take the stock higher to ₹1,450 and ₹1,470 in the short term. This rally could get delayed if RIL declines below ₹1,400. In such a scenario, a dip to ₹1,380 can be seen. A break below ₹1,380 can drag the stock lower to ₹1,370 and ₹1,365. The region around 1,365 is a strong support and a further break below it unlikely. A bounce from the ₹1,370-1,365 support zone will see a revisit of ₹1,400 levels.

Tata Steel (₹547.6)

Tata Steel rose to a high of ₹560 as expected, but fell subsequently, giving back most of the gains. The view remains the same as last week’s. The supports between ₹540 and ₹530 can limit the downside in the near term. As long as Tata Steel trades above this support zone, the outlook is positive. The near-term resistance is at ₹560. A strong break above it will boost the momentum. Such a break will see Tata Steel surging towards ₹600 levels again in the coming weeks. On the other hand, a break below ₹530 can drag the stock lower to ₹515 and ₹500. But such a fall looks less likely as the indicators on the charts are positive. The 55-day moving average has crossed over the 100-day moving average. This is a bullish signal, indicating that the downside could be limited. This means a lesser possibility of the stock declining below ₹530 in the coming days. As such, Tata Steel may consolidate sideways between ₹530 and ₹560 for some time before surging towards ₹600.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on May 04, 2019

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