Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on August 17, 2019 Published on August 17, 2019

SBI (₹290.9)

After tumbling over 21 per cent in five weeks, SBI got a breather last week. However, the broader bearish view is intact. There is room for a further fall. The indicators on the charts are also negative. The 21-day moving average has gone below the 100-day moving average — a bearish signal indicating that the upside could be capped. The₹304-307 will be a key near-term resistance, which can restrict the upside. Any sharp short-covering rally beyond ₹307, though unlikely, may be limited to ₹319 — a key trend resistance level. Immediate support is at ₹280, also substantiated by a rising trend-line in weekly time frame. A break below it can drag SBI to ₹272 or ₹268. The region between ₹272 and ₹268 is a strong medium-term support, which can halt the current fall. A strong bounce from this support zone on short-covering can take SBI up to ₹315 and ₹320. But a decisive break below ₹269 will increase the downside pressure on the stock. This break will increase the possibility of the fall extending to ₹230 over the medium term.

ITC (₹252.9)

ITC tumbled about 4 per cent intraweek but managed to claw back from the low of ₹244.2, recovering most of the loss, and closed 0.5 per cent lower for the week. Immediate resistances are at ₹257 and ₹259, which can be tested in the near term. But a rise beyond ₹259 is less likely. A pull-back from ₹257 or ₹259 can drag the stock lower to ₹245 again. It will also keep the broader downtrend intact. The stock will remain under pressure and can test the crucial long-term support level of ₹240. The current downtrend can halt around ₹240, as a break below this support might not be easy. As such, a fall to ₹240 could be a good buying opportunity. A strong bounce from ₹240 can take ITC higher to ₹260-265. A sideways consolidation between ₹240 and ₹265 is possible before we see a fresh leg of upmove. A strong rise past ₹265 will confirm the trend reversal. It will then increase the likelihood of the stock rallying towards ₹290 and ₹300 over the medium term.

Infosys (₹774.5)

Infosys retains its ₹755-805 sideways range. The stock has been stuck in this range over the last five weeks. Within this band, Infosys fell 2 per cent last week. The near-term outlook continues to remain unclear. A breakout on either side of ₹755 or ₹805 will determine the direction of the next move. However, the bias on the chart is negative. The price action on the daily chart leaves the possibility high of the stock breaking the range below ₹755. A break below ₹755 can take the stock initially lower to ₹750-745. A further break below ₹745 will then increase the likelihood of the stock extending its fall to ₹720 and ₹700 thereafter. The level of ₹700 is a crucial long-term support. A strong break below it will signal a trend reversal. But if Infosys sustains above ₹755 and manages to break the range above ₹805, it will gain fresh momentum. Such a break will keep the overall uptrend intact and indicate the resumption of the same. In such a scenario, Infosys can rise to ₹850 and ₹870 in the coming weeks.

RIL (₹1,278)

RIL surprised with a strong surge last week. The stock opened with a wide gap-up and surged 12 per cent intraweek to make a high of ₹1,304. The stock has reversed lower from the high, giving back some of the gains and closed 10 per cent higher for the week. A few major announcements in the company’s annual general meeting triggered this sharp rally. The strong surge in the past week has wiped out the chances of the fall to ₹1,050-1,030 that we had been expecting for some time. A key support is at ₹1,215 and resistance is at ₹1,300. RIL can consolidate between ₹1,215 and ₹1,300 for some time. A breakout on either side of ₹1,215 or ₹1,300 will then determine the direction of the next move. The sentiment is positive after the outcome of the AGM last week. So, the possibility is high for RIL to breach ₹1,300. Intermediate dips to ₹1,230-1,220 are likely to witness fresh buying interest. A strong break above 1,300 can take RIL initially higher to ₹1,400 and eventually towards ₹1,480 in the coming weeks.

Tata Steel (₹362.8)

Tata Steel tumbled 5 per cent intraweek. However, the stock managed to bounce-back from the low, recovering all the loss and closed on a flat note. The broader downtrend is intact and the stock is likely to remain under pressure. Any intermediate bounce could be capped at the key barrier of ₹387, as fresh sellers are likely to emerge at higher levels. Tata Steel can fall to ₹330-320 in the short term. A corrective rally to ₹350-370 is possible from the ₹330-320 zone. However, the current downtrend which has been in place since 2018 looks strong. It may have the potential to drag Tata Steel lower to ₹250-230. The indicators on the charts are also in favour of this fall. The 21-week moving average is on the verge of crossing below the 200-week moving average. This is a negative signal, indicating that the upside could be limited in the medium term.

The writer is a Chief Research Analyst at Kshitij Consultancy Services

Published on August 17, 2019
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