Technical Analysis

Weekly Trading Guide

| Updated on July 14, 2019 Published on July 14, 2019

SBI (₹363.55)

SBI snapped its three-week rally. The stock tumbled over 5 per cent intra-week but managed to recover some of the loss. SBI closed 2 per cent lower for the week. The support at ₹350 has held well and is keeping the uptrend intact. The key resistance is at ₹372. A strong break above it is needed for SBI to gain fresh momentum and resume the uptrend. Such a break will pave way for a fresh rally to ₹395 and ₹400. The region at around ₹400 is a strong resistance for the stock, which can halt the current uptrend. As such, a corrective fall is possible from around ₹400. On the other hand, if SBI fails to breach ₹372, it can fall to the next key support levels of ₹360 and ₹350 again. In such a scenario, a range-bound move between ₹350 and ₹372 can be seen for some time. The stock will come under pressure only on a break below ₹350. Such a break, though less likely at the moment, can drag SBI lower to ₹340 and ₹330 on the back of profit-taking.

ITC (₹274.95)

ITC fell 1.6 per cent last week giving back all the gains made in the week earlier. This fall has negated the possibilities of a turn-around mentioned last week. ITC can continue to consolidate between ₹270 and ₹282 within its overall downtrend. A breakout on either side of ₹270 or ₹282 will determine the direction of the next move. A strong break above ₹282 will give a breather to the stock. Such a break can take ITC higher to ₹290 — the next key resistance level. A break above ₹290 will confirm the trend reversal and increase the likelihood of the upmove extending to ₹300. But inability to breach ₹290 can keep the stock in a sideways range between ₹282 and ₹290 for some time. On the other hand, if ITC breaks the current range below ₹270, it will come under renewed pressure. This can drag the stock to ₹260. A further break below ₹260 will intensify the downtrend. It will also increase the possibility of the stock tumbling towards ₹245-₹240.

Infosys (₹727.1)

Infosys bounced last week. The stock was up 1.2 per cent. This has eased the threat of the stock breaking below the ₹700-695 support zone. The up-move has also kept the broader ₹695-775 sideways range intact. Infosys has been stuck in this range for a prolonged period of time since mid-January this year. An immediate resistance is at ₹732. Inability to breach this hurdle can pull the stock lower and keep it in a narrow range between ₹700 and ₹732 . But a strong break above ₹732 will take the stock higher to ₹755-₹760 band. A further break above ₹760 will then increase the likelihood of the stock extending its up-move to ₹775 . A breakout on either side of ₹695 or ₹775 is needed to determine the direction of the next move. A strong break above ₹775 will be bullish for a fresh rise to ₹800 and ₹810. But if Infosys break the range below ₹695, it will increase the likelihood of the stock tumbling towards ₹650.

RIL (₹1,280.6)

RIL has been stuck in the band between ₹1,245 and ₹1,315 over the last three weeks. This continues to keep the near-term outlook mixed. A breakout on either side of ₹1,245 or ₹1,315 will give a clear cue on the next leg of move. If RIL breaks the range above ₹1,315, an up-move to ₹1,350-₹1,360 is possible. It will ease the downside pressure and bring back the possibilities of the stock revisiting ₹1,400. But if RIL breaks the current range below ₹1,245, it will come under renewed pressure and fall to ₹1,220. A further break below ₹1,220 will then drag the stock lower to ₹1,210 and ₹1,200. The region around ₹1,200 is a strong long-term support. The down-move extending beyond ₹1,200 looks less probable at the moment as fresh buyers are likely to emerge at lower levels. But if RIL declines below ₹1,200, it will mark the end of the long-term uptrend that has been in place since 2017. The stock can decline to ₹1,150 and ₹1,100.

Tata Steel (₹472.6)

Tata Steel fell below the crucial support level of ₹460 but managed to claw-back from the low of ₹448.1. The stock has to sustain above ₹460 to avoid any further fall. As long as Tata Steel remains above ₹460, a rise to ₹500 is possible and the ₹460-520 sideways range will remain intact. Tata Steel has to rise past ₹520 decisively to gain fresh momentum. A rise to ₹550-₹560 is possible. Such an up-move will also indicate that the downtrend in the stock could have come to an end. But a strong break and a decisive close below ₹460 will bring the stock under pressure. It will mean that the long-term downtrend that has been in place since 2018 is still intact. It will also increase the possibility of the stock tumbling towards ₹400. The move below ₹460 could be sharp and swift.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on July 14, 2019

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