Technical Analysis

Weekly Trading Guide

| Updated on June 22, 2019 Published on June 22, 2019

SBI (₹349.45)

SBI fell about 3 per cent in the initial part of the week. However, the stock managed to claw-back from the low of ₹333.75, recovering all the loss and closed 1.6 per cent higher for the week. An immediate resistance is at ₹352 for the stock which can be tested in the near future. A strong rise past this hurdle will take the stock higher to the next crucial resistance level of ₹362.

As mentioned last week, SBI has to breach ₹362 decisively to gain fresh bullish momentum and target ₹390 and ₹400. But a pull-back from ₹362 can drag SBI lower to ₹350 again. In such a scenario, the stock can remain range-bound between ₹335 and ₹362 for some more time. On the other hand, if SBI fails to surpass the immediate resistance level of ₹352, it can fall to ₹335 again. In that case, SBI can trade between ₹335 and ₹352 for some time. The stock will come under pressure if it declines below ₹335 levels. Such a break can take the stock lower to ₹325-320. The region around ₹320 is a strong long-term support and a further fall below it is unlikely.


ITC (₹274.2)

ITC continued to trade lower and has declined below ₹275 as expected. The stock was down 1.3 per cent last week. The outlook is bearish. Strong resistance is in the ₹280-282 region, which has been capping the upside over the last few weeks. Intermediate support is at ₹272.5. If this support holds, a range-bound move between ₹272.5 and ₹282 is possible for some time.

However, the bias will continue to remain negative as the indicators on the charts are negative. The 21-day moving average has crossed below the 100-day moving average as expected. This indicates that the downtrend is intact and the upside could be limited. An eventual break below ₹272.5 will bring renewed pressure on the stock. Such a break below will increase the likelihood of it tumbling towards ₹265 and ₹260. The levels of ₹262 and ₹257 are crucial long-term supports. The current downtrend is likely to find a bottom around these levels. A strong bounce from these supports will mark the beginning of a long-term uptrend in this stock.


Infosys (₹750.7)

Infosys has been stuck inbetween its support at ₹735 and resistance at ₹759 over the last couple of weeks. Within this range, the stock fell to ₹735 and bounced sharply from there to close 1.4 per cent higher last week. The 21-week moving average support level of ₹735 has held very well as expected and keeps the bullish view intact.


The immediate resistance level of ₹759 is likely to be tested in the near term. The bias on the chart is positive. The 21-day moving average has crossed over the 55-day moving average. This is a bullish signal, which indicates that Infosys is likely to breach ₹759 and rise to ₹770 and ₹775 again. Inability to break above ₹775 can drag the stock lower to ₹755 and ₹750 again. Such a pull-back move will keep the broader ₹695-775 sideways range intact. The stock has been stuck in this range for a prolonged period of time since mid-January this year. On the other hand, if Infosys manages to surpass ₹775 decisively, it will gain fresh momentum and target ₹795 and ₹800 thereafter.


RIL (₹1,279.2)

As expected, RIL declined below the psychological level of ₹1,300. The stock was down about 3 per cent last week and closed decisively below the 21-week moving average level of ₹1,309. The level of ₹1,300 will now act as a strong support-turned-resistance and cap the upside. As long as the stock trades below ₹1,300, the outlook will remain negative. RIL has to rise past ₹1,300 decisively to negate the bearish view and rise to ₹1,320 and ₹1,350 levels again.

But such a strong up-move looks unlikely now. As such, a fall to ₹1,240 can be seen in the near term. If the RIL stock manages to bounce from ₹1,240, a relief rally to ₹1,300 is possible. But a break below ₹1,240 will then increase the likelihood of the fall extending to ₹1,220 and ₹1,200. The region between ₹1,220 and ₹1,200 is a strong long-term support for the stock. A further fall below ₹1,200 looks unlikely as fresh buyers are likely to emerge at those levels. A strong bounce from ₹1,200 may indicate the beginning of a fresh leg of a long-term uptrend for the stock.


Tata Steel (₹497.75)

Tata Steel tumbled over 7 per cent intraweek, but managed to bounce-back, recovering almost all the loss. The near-term outlook is unclear. Support is at ₹492 and resistance at ₹506. A breakout on either side of ₹492 or ₹506 will decide the direction of the next move.

A break above ₹506 will ease the downside pressure. Such a break will take the stock higher to ₹515 and ₹520. The region around ₹520 is a crucial long-term resistance, which has to be breached decisively to turn the outlook bullish. A break above ₹520 can take Tata Steel up to ₹530. But if the stock breaks below ₹492, it can fall initially to ₹475. A further break below ₹475 will then increase the likelihood of the stock revisiting ₹465-460 levels. Tata Steel can trade in a wide range of ₹460-520 in the coming weeks. A breakout on either side of ₹460 or ₹520 will set the direction of the next move.


The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on June 22, 2019

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