Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated 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

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