Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on July 22, 2019 Published on July 20, 2019

SBI (₹356)

SBI began the week on a strong note and surged over 2 per cent, but failed to sustain higher. The stock reversed sharply lower from the high of ₹373, giving back all the gains and closed 2 per cent lower for the week. The daily chart indicates the formation of a double-top reversal pattern. The neckline support of this pattern is at ₹350, which can be tested in the early part of the week. If SBI manages to bounce back from this support, a rise to ₹365 and ₹370 is possible again. In such a scenario, SBI can continue to trade sideways between ₹350 and ₹373 for some more time. Also, a decisive close above ₹373 is needed to bring back the bullish sentiment and take the stock up to ₹395 and ₹400. But if SBI breaks decisively below ₹350, it can come under pressure. Such a break will confirm the double-top pattern. In such a scenario, SBI can fall initially to ₹345. A further break below ₹345 will then increase the likelihood of the stock extending its fall to ₹335 thereafter.


ITC (₹268.4)

ITC fell for the second consecutive week and was down 2.4 per cent. The fall last week has taken the stock below the crucial support level of ₹270, which was holding well over the last few weeks. ITC is under pressure now. As long as it trades below ₹270, the outlook is bearish. Immediate support is at ₹267. If ITC manages to bounce back from this support, an intermediate upmove to ₹270 is possible. But the upside is likely to be capped as fresh sellers are likely to emerge at higher levels. There is a strong likelihood of the stock falling to ₹260. A corrective rally to ₹268-270 cannot be ruled out from ₹260. However, the outlook will continue to remain negative. An eventual break below ₹260 will increase the possibility of the stock extending its fall to ₹250 or even ₹240 over the medium term. The region between ₹250 and ₹240 is a strong long-term support zone, which can halt the fall and trigger a reversal. So, such a fall to ₹250-240 will be a good buying opportunity from a long-term perspective.


Infosys (₹785.6)


Infosys surged to record highs and was up over 8 per cent last week. Sanguine Q1 earnings triggered this sharp rise last week. The rise has brought the prolonged sideways move between ₹695 and ₹775 to an end. The stock has been stuck in this range since mid-January this year. It needs to be seen if Infosys sustains above ₹775; this will give a confirmation of the range breakout. As long as the stock remains above ₹775, the outlook is bullish and a retest of ₹800 is possible in the near term. Infosys has to rise past ₹800 decisively to gain fresh momentum. A strong break above ₹800 will see the stock rallying to ₹850 and ₹870 in the coming weeks. On the other hand, if Infosys remains below ₹800 and breaks below ₹775, a fall to ₹765 or ₹750 is possible. In such a scenario, the stock can remain range-bound between ₹750 and ₹800 for some time. However, the bias will continue to remain positive. A further fall below 750 looks less likely at the moment.

RIL (₹1,249)


RIL retained its ₹1,245-1,315 sideways range. The stock has been stuck inside this range over the last four weeks. Within this range, the stock tumbled 2.5 per cent last week and hovers at the lower end of the range. If RIL manages to bounce back, the sideways range will remain intact and a rise to 1,300 is possible. A breakout on either side of ₹1,245 or ₹1,315 will then determine the direction of the next move. If RIL breaks the range below ₹1,245, it can fall initially to ₹1,220 and then to ₹1,210 and ₹1,200. The region around 1,200 is a strong long-term support and a break below it, is less probable. But if RIL declines below ₹1,200, it will signal the end of the long-term uptrend that has been in place since 2017. In such a scenario, RIL can tumble to ₹1,150 and ₹1,100 on profit-booking. On the other hand, if RIL breaks above ₹1,315, an upmove to ₹1,350-1,360 is possible. It will also bring back the possibility of the stock revisiting ₹1,400 levels thereafter.

Tata Steel (₹458.1)

Tata Steel tumbled over 3 per cent last week. It has declined below the crucial support at ₹460. As long as it trades below ₹460, the outlook would be negative. Next support is at ₹445. A bounce from there can take the stock up to ₹480. In such a scenario, Tata Steel can remain range-bound between ₹445 and ₹480. The bias will remain negative. An eventual break below ₹445 will indicate the resumption of the long-term downtrend that has been in place since 2018. Such a break below ₹445 will drag the stock lower to ₹400. The region around ₹400 is a key support. As such a corrective bounce to ₹450 from ₹400 cannot be ruled out. However, investors should remain cautious as the current leg of down move may have the potential to take the stock to ₹350 or even lower levels in the medium- to long-term.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on July 20, 2019

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