Technical Analysis

Weekly Trading Guide

Akhil Nallamuthu | Updated on September 01, 2019 Published on August 31, 2019

SBI (₹273.85)

SBI opened the week on a solid note, with a 6.2 per cent gap-up at ₹288 against the previous close of ₹271.10. However, the gap-up did not sustain, and the stock failed to rally. It began to fall right from the start of last week’s first trading session. The stock attempted to recoup its losses but was once again sold off at ₹288 levels and ended the week at ₹273.85. The broader trend remains bearish. The stock closed below the critical level of ₹280, also breaching a rising trend-line in the daily time-frame. ₹263 remains a key support and until that level holds, the stock might not see further selling. But a downside break of ₹263 can drag the stock to ₹257 levels, a break of which will open the doors for further decline towards ₹250. On the other hand, if the price bounces from the current levels on short-covering, the stock can advance to ₹280 and even ₹292 over the short term.

ITC (₹245.65)

Following its major trend, ITC extended its losses below the 52-week low towards an important demand zone between ₹236 and ₹238. It attempted a recovery and closed at ₹245.65, marginally gaining over the past week. However, recoveries are being rejected at ₹246, which acts as a significant resistance. Hence, a breakout, pushing the price beyond that level, is needed for the stock to attract fresh buying interest. If that breakout sustains and the stock moves up, it can face an immediate hurdle at ₹250. Inthe recent past, the 20-day moving average has arrested the uptrend numerous times, preventing the stock from moving higher. Above ₹250, the stock has more room to appreciate and can reach ₹260 over the medium term. Alternatively, if the price drops by aligning with the major trend, it can retest the ₹236-238 zone. If the level fails to hold the decline, the stock can tumble to ₹224.

Infosys (₹814.90)

Infosys broke out of the consolidation band between ₹762 and ₹804 and ended the week at ₹814.90 — its life-time high. After consolidating for over a month, the stock closed above the upper limit of the range on Friday, confirming the breakout. The price bounced from the 20-day moving average and closed above the critical resistance of ₹800 with good volumes. With such a solid breakout, the IT major has the potential to appreciate towards ₹840. The daily relative strength index is at 63 and has more room to reach the over-bought levels; the other oscillator — moving average convergence divergence — too points up. But, if the price retracts below ₹800, the breakout might be negated, and the scrip may decline to ₹787. If the decline continues and the price weakens below ₹787, there is opportunity for the stock to test ₹762. A drop below ₹762 is highly unlikely in near term, as it provides a strong support.

RIL (₹1,248.55)

The chart of Reliance Industries suggests that the stock has been sluggish for some time. Though the broader trend is bullish, it seems to be losing steam. The consolidation range has become tighter and the stock now trades back and forth between ₹1,226 and ₹1,304. On Friday, the stock bounced from the 20-day moving average, recouping some of the past week’s losses. For the bulls to regain control, the price must break above ₹1,304. If such a breakout occurs, the stock price will rise to the ₹1,360 levels in short term; in fact, the stock appreciating to ₹1,400 levels cannot be ruled out. However, the RSI seems to be on the verge of breaking below 50 level, while the MACD may drop into the negative territory even with a minor fall in price from the current level, both indicating a possible weakness. If the weakness results in the stock breaking below ₹1,226, the price may fall to ₹1,200 or even ₹1,180 in short term.

Tata Steel (₹344.90)

Tata Steel has been in a sideways trend for nearly two weeks, trading in the band between ₹330 and ₹350. The stock also trades below the 20-day moving average, indicating that the broader bearish trend is still intact. There’s a support at ₹320 and the scrip has recently bounced off from that level. Hence, until the stock remains above₹320, the bears might find it difficult to drag it down. From the current levels, immediate resistance falls at the upper side of the consolidation range at ₹350. So, for the stock to rise, either the upper or the lower limit of the sideways trend should be breached. If the steel company’s price manages to break above the upper limit of the range because of external factors that have been affecting the stock, the price could appreciate towards ₹395 levels in the medium term. But, if it breaks below ₹320, the price could, most probably, decline to ₹300 or even ₹290 over the medium term.

Published on August 31, 2019
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