Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on July 27, 2019 Published on July 27, 2019

SBI (₹342.5)

SBI tumbled 3.8 per cent last week, breaking below the key support level of ₹350. The next support near ₹335 is holding well as of now. As long as SBI sustains above this support, a corrective rally to ₹350 is possible in the near term. A strong break and a decisive close above ₹350 are needed to ease the downside pressure and bring back the bullish sentiment. But a rally beyond ₹350 looks less probable now as fresh sellers are likely to emerge at higher levels. A pull-back from ₹350 can drag the stock lower to ₹335 again. An eventual break below the key base level of ₹335 will then increase the likelihood of the downtrend resuming and declining to ₹328. The level of ₹328 is a strong support where both the 21-week moving average as well as a trend-line support are poised. As such the current down-move can halt around ₹328 and a bounce to ₹335-340 is possible from there. But if SBI declines below ₹328, the down-move can extend to ₹320 in the ensuing weeks.

ITC (₹270.3)

ITC fell over a per cent in the initial part of the week, but managed to bounce thereafter. The stock made a low of ₹264.4 and reversed higher recovering all the loss. The 200-week moving average support is holding well as of now. However, a key resistance is at ₹273 (21-day moving average) which has to be breached to get a breather. A strong break above ₹273 can trigger a corrective rally to ₹278 and ₹282. The region between ₹282 and ₹285 is a strong resistance which is likely to cap the upside. A rise past ₹285 looks unlikely at the moment. On the other hand, if ITC fails to breach the immediate resistance level of ₹273 in the coming days, it can dip to test ₹263 again. A sideways consolidation between ₹263 and ₹273 is possible for some time. The bias will remain bearish. An eventual break below ₹263 can take the stock initially lower to ₹257. A further break below ₹257 will then increase the likelihood of the fall extending to ₹245 – a strong long-term support.

Infosys (₹787.3)

Infosys rose last week to test ₹800 as expected, but failed to sustain higher. The stock made a high of ₹804.25 and oscillated between ₹782 and ₹805 all through the week. The near-term outlook is unclear. Support is at ₹780 and resistance at ₹800. The stock can trade sideways between ₹780 and ₹800 for some time. A breakout on either side of ₹780 or ₹800 will then determine the direction of the next move. A break below ₹780 can trigger profit-booking and drag the stock lower to ₹765. A cluster of supports is poised in the band between ₹765 and ₹750. So the downside could be limited to ₹750 if the stock declines below ₹780. On the other hand, if Infosys manages to sustain above ₹780, the bias will remain positive. It will keep the possibility high of the stock breaking above ₹800. Such a break above ₹800 will give a fresh boost to the stock. It will also indicate the resumption of the uptrend and take the stock up to ₹850 and ₹870 in the coming weeks.

RIL (₹1,214.1)

RIL tumbled 2.8 per cent, breaking below the crucial support level of ₹1,250. The price action over the last month indicates that the stock has been lacking strong buyers to take it above ₹1,300. This coupled with the sharp fall below ₹1,250 gives an initial sign of the long-term uptrend getting reversed. A further fall below the psychological level of ₹1,200 will confirm the same. Such a fall will increase the likelihood of the stock tumbling to ₹1,130-1,120 in the coming weeks. The move below ₹1,200 could be sharp and swift as it could trigger strong profit-booking. But, if RIL manages to sustain above ₹1,200, a bounce to ₹1,250 is possible. In such a scenario, a sideways move in the ₹1,200-1,250 band can be seen for some time. RIL has to rise past ₹1,250 decisively to ease the downside pressure. A rise to ₹1,300 is possible on a break above ₹1,250. But such a strong up-move looks unlikely at the moment as fresh sellers are likely to emerge around ₹1,250 levels and cap the upside.

Tata Steel (₹445.2)

Tata Steel extended its fall and kept the downtrend intact. The stock was down 2.8 per cent last week. An immediate resistance is in the ₹448-450 region and the next significant one is at ₹470, which can cap the upside. A rise past ₹470 looks unlikely. Tata Steel is likely to tumble towards ₹400 in the coming weeks. The region around ₹400 is a key support. The 61.8 per cent Fibonacci retracement support is also poised around ₹400. As such, the current fall can halt at ₹400. A corrective rally to ₹450 is possible if Tata Steel manages to bounce from ₹400. But the upside of this corrective rally is likely to be capped at ₹450. But if the stock fails to bounce from ₹400 and falls further, the downside pressure will increase. The break below ₹400 will see the stock tumbling to ₹350 or lower over the medium term.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on July 27, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.