Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on August 10, 2019 Published on August 10, 2019

SBI (₹291.3)

SBI continued the fall for the fifth consecutive week. The stock tumbled 5.5 per cent last week. With this fall, the stock has plummeted 21.4 per cent over the last five weeks. On the charts, there is room for the fall to extend further in the coming days. The levels of ₹304 and ₹307 are the key near-term resistances which can cap the upside. There is possibility of a sideways consolidation between ₹285 and ₹307 (200-day moving average) in the near term. But a strong rise past ₹307 looks less likely now as the broader bias continues to remain negative. As such, SBI is likely to decline eventually below ₹285 and extend the current downtrend to ₹275-273 or even ₹269. The broad region between ₹275 and ₹269 is a strong support zone, which can halt the current fall. A corrective rally to ₹290-300 is possible from this support zone on short-covering. But if SBI declines below ₹269, it will come under more pressure. Such a break will increase the likelihood of the stock tumbling towards ₹245-240 or even ₹230.

ITC (₹254.2)

ITC fell about 4 per cent last week breaking below the support level of ₹263 (200-week moving average) as expected. The downtrend remains intact. However, ITC is coming closer to an intermediate support level of ₹250. If it manages to bounce from this support, a corrective up-move to ₹260 or ₹265 is possible. ITC may, thus, remain range-bound between ₹250 and ₹265 for some time. However, a strong rally beyond ₹265 looks unlikely. An eventual break below ₹250 will see the stock resuming the downtrend to ₹240 — possibly the last leg of move in the current downtrend. The level of ₹240 is a strong long-term trend support, which can halt the current downtrend. A strong bounce from ₹240 can take the stock up to ₹260-265. There is possibility of the stock forming a base by consolidating between ₹240 and ₹265. A decisive break above ₹265 can start a fresh rally, targeting ₹290-300 over the medium term. But if ITC declines below ₹240, the fall can extend to ₹230-228 band.

Infosys (₹790.1)

Infosys has remained stuck between ₹755 and ₹805 over the last four weeks. Within this range, the stock rose about 2 per cent last week. The near-term outlook continues to remain unclear. The up-move in the past week looks weak. This reduces the possibility l of the stock breaking above ₹805 — the upper end of the range at the moment. The stock can reverse lower again towards ₹765 and ₹755 and maintain the sideways move t for some more time. A breakout on either side of ₹755 or ₹805 will determine the direction of the next move. If Infosys manages to break above ₹805, it can gain fresh momentum. Such a break will indicate the resumption of the broader uptrend. It will then take the stock up to ₹850 and ₹870 in the coming weeks. On the other hand, if Infosys breaks the range below ₹755, it can come under pressure. Such a break can take the stock initially lower to ₹740. A further break below ₹740 will then increase the likelihood of the fall extending towards ₹715 and ₹700 on profit-booking.

RIL (₹1,162.0)

RIL tumbled over 7 per cent intra-week to a low of ₹1,095.65. However, the stock has managed to claw-back sharply from the low. But this bounce-back is just a short-covering rally which may not last long. A further rise to test the immediate resistance level of ₹1,190 is possible in the near term. A break above ₹1,190 will extend the corrective rally to ₹1,220. However, a further rise past ₹1,220 is less likely as fresh sellers can emerge at higher levels. Also, the indicators on the charts are bearish. The 21-day moving average has crossed below the 200-day moving average. This is a bearish signal, indicating that the upside could be limited. As such, RIL is likely to reverse lower either from ₹1,190 or ₹1,220. It will then take the stock lower to ₹1,100-1,090 levels again. Inability to break below ₹1,090 can keep the stock sideways between ₹1,090 and ₹1,220 for some time. But the bias will continue to remain negative and RIL is likely to decline below ₹1,090 eventually. Such a break will then drag the stock lower to ₹1,050 and ₹1,030

Tata Steel (₹362.3)

Tata Steel is on a free fall and has declined to ₹360 as expected. The stock tumbled 11.4 per cent last week. Tata Steel has plummeted over 28 per cent in the last six weeks. An immediate support is at ₹358. If Tata Steel manages to bounce from this support, a corrective rally to ₹385 or ₹400 is possible on short-covering. A rise past ₹400 is unlikely now as fresh sellers can emerge at higher levels and keep the broader downtrend intact. As such, an eventual break below ₹358 will see the current fall extending to ₹330 and ₹325. As cautioned last week, from a long-term perspective, the current downtrend which had begun in 2018 is looking strong. This downtrend may have the potential to drag Tata Steel to ₹250-230. An intermediate halt and a corrective bounce is possible from the ₹310-300 support zone before the targets of ₹250-230 are achieved.


The writer is a chief research analyst at Kshitij Consultancy Services

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Published on August 10, 2019
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