Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on August 26, 2019 Published on August 24, 2019

SBI (₹271.1)

SBI can face resistance ahead

After taking a breather in the week earlier, SBI resumed its fall and tumbled 6.8 per cent last week. Though there is a possibility to see a near-term corrective bounce, the broader picture remains weak. A strong resistance at ₹280 can cap the rally. A consolidation between ₹260 and ₹280 for a week cannot be ruled out. The indicators on the charts remain bearish, keeping the doors open for further fall. The 21-day moving average has crossed below the 200-day moving average — a bearish cross-over indicating that the upside could be limited. As such, SBI is likely to keep the downtrend intact and break below ₹260 in the coming days. Such a break can take the stock initially lower to ₹250-245. A further break below ₹245 will then increase the likelihood of the fall extending to ₹230. The broad region between ₹240 and ₹230 is a strong support zone which can halt the current downtrend. A corrective rally, thereafter, to ₹270-280 cannot be ruled out. But a strong break below ₹230 will increase the possibility of the stock tumbling further to ₹190-180 over the medium term.

ITC (₹236)

ITC breaks crucial long-term support

ITC is under pressure. The stock plummeted 6.8 per cent last week. This sharp fall has dragged the stock well below the crucial long-term support level of ₹240. We will have to wait and see if ITC sustains below ₹240 and confirms the break. It has to reverse sharply higher and close decisively above ₹243 to get a breather. In such scenario, the chances of seeing a further fall will get reduced, and a corrective rally to ₹255 and ₹260 is possible. But an inability to bounce above ₹243 can take ITC lower to the next key support level of ₹228.5. If it manages to hold above this support, it can consolidate between ₹228 and ₹243 for some time. But as long as ITC trades below ₹243, it will remain under pressure. An eventual break below ₹228.5 will confirm the break of the long-term uptrend and intensify the fall further. Such a break will see the stock tumbling further towards the next major support levels of ₹211 and ₹207. It will also keep the possibilities high of the stock extending the fall even up to ₹200 and ₹190.

Infosys (₹801.9)

Infosys to remain range-bound

Infosys broke the ₹755-805 range on the upside last week, but failed to sustain higher. The stock made a high of ₹809.95 and came off slightly from there to close just below the upper end of the ₹755-805 range. The stock was up 3.5 per cent last week. A strong break and a decisive close above ₹805 are needed to confirm the range breakout. A key support is at ₹789. As long as Infosys remains above this support, there is a strong likelihood of the stock breaking the range above ₹805. Such a break will boost the momentum and take the stock higher to ₹850 and ₹870 in the coming weeks. But if the stock remains below ₹805, a narrow range-bound move between ₹789 and ₹805 is possible in the near term. A break below ₹789 will reduce the chances of the stock breaching ₹805. Such a break will see an initial dip to ₹785. A further break below ₹785 will then strengthen the downmove and drag the stock lower to ₹768 and ₹763. In that case, the ₹755-805 range will continue to remain intact.

 

RIL (₹1,275.95)

Near-term outlook is unclear for RIL

RIL fell sharply by 4 per cent intra-week to make a low of ₹1,226.8. However, it managed to claw back on Friday, recovering all the loss. RIL has been stuck in a sideways range between ₹1,225 and ₹1,304 over the past couple of weeks. This leaves the near-term outlook mixed. As mentioned last week, RIL can consolidate sideways between ₹1,215 and ₹1,305. A breakout on either side of ₹1,215 or ₹1,305 will determine the direction of the next move. Though the strong bounce on Friday keeps the bias positive, weakness in the broader markets may play spoil sport. As such, the possibility of the stock declining below ₹1,215 in the coming days cannot be ruled out. Such a break will bring renewed pressure on the stock and increase the chances of it revisiting ₹1,150 and ₹1,100 levels in the coming weeks. On the other hand, if RIL breaks above ₹1,305 decisively, it will gain fresh momentum. In such a scenario, the stock can surge to ₹1,400. An eventual break above ₹1,400 will then pave way for a further rally to ₹1,480 over the medium term.

The downtrend remains intact in Tata Steel. The stock tumbled 5 per cent last week. It has plummeted over 30 per cent over the last eight weeks. The support in the ₹330-320 zone mentioned last week is holding well as of now. But the indicators on the charts are bearish. 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. As such, it can continue to remain under pressure and any intermediate bounce could be short-lived. An immediate resistance is in the ₹353-355 region which can cap the upside in the near term and keep the stock under pressure. An eventual break below ₹320 will see the fall extending to ₹300 and even lower going forward. Also, as being reiterated in this column over the past few weeks, the current downtrend — which has been in place since 2018 — looks strong. It has the potential to drag Tata Steel lower to ₹250-230 in the coming months.

Tata Steel (₹344.8)

Downtrend intact in Tata Steel

 

The downtrend remains intact in Tata Steel. The stock tumbled 5 per cent last week. It has plummeted over 30 per cent over the last eight weeks. The support in the ₹330-320 zone mentioned last week is holding well as of now. But the indicators on the charts are bearish. The 21-week moving average is on the verge of crossing below the 200-week moving average. This is a negative signal — the upside could be limited. As such, it can continue to remain under pressure and any intermediate bounce could be short-lived. An immediate resistance is in the ₹353-355 region which can cap the upside in the near term and keep the stock under pressure. An eventual break below ₹320 will see the fall extending to ₹300 and even lower going forward. As reiterated in this column over the past few weeks, the current downtrend — which has been in place since 2018 — looks strong. It has the potential to drag Tata Steel lower to ₹250-230 in the coming months.

The writer is Chief Research Analyst at Kshitij Consultancy Services

Published on August 24, 2019
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