High Five: SBI, ITC, Infosys, Reliance, Tata Steel

SBI tests a significant resistance

In the midst of volatility, the stock of SBI climbed 3.3 per cent and tests a key resistance at ₹247. Since its early August peak of ₹291, the stock has been in a short-term downtrend. A strong breach of the significant trend-deciding level of ₹260 is needed to change the downtrend and take the stock to ₹270 or ₹280 levels in the short term. Medium-term trend is also down. To alter this trend, the stock has to conclusively rally above the significant resistance level of ₹290. The indicators in the daily chart are showing mixed signals. Moreover, decrease in the daily volumes shows lack of strength. Therefore, traders with a short-term view should tread with caution and initiate fresh short position only on a fall below ₹237, with a fixed stop-loss. Such a fall can pull the stock down to ₹230 and then to ₹220 in the short term. Subsequent supports are at ₹210 and ₹200.

ITC breaks an important barrier

The stock of ITC surged 4.4 per cent, breaking through the sideways consolidation phase at ₹331 as well as its 200-day moving average last week. This rally strengthens the bullish momentum. However, the stock met with a key long-term hurdle at ₹345 and tests this level. A strong rally above this level can take the stock higher to ₹354 — a crucial trend-deciding level. An emphatic break above ₹354 will alter the stock’s medium-term downtrend and take it northwards to ₹370 and ₹380 levels. It may however find difficulty in surpassing the resistances at ₹345 and ₹354. The stock may test the level and move sideways; corrective declines can find support in the ₹331-334 band. A fall below ₹331 can bring back bearish sentiment and drag the stock to ₹320 or ₹310. Hence traders with a short-term perspective should tread with caution.

Infosys still tests a resistance band

The stock's 3 per cent surge on Friday has helped it to recover and trim its weekly loss to ₹5. The stock was choppy and formed a spinning top candlestick pattern, signalling indecisiveness in its Q2 results due on October 12. The stock is on an uptrend across the time frames — long, medium and short. Further, the short-term uptrend is intact. Nevertheless, the stock now tests a key medium-term resistance level in the band between ₹1,170 and ₹1,180. A strong break-out of this resistance can reinforce the bullish momentum and accelerate the stock to ₹1,200 and ₹1,220 levels. Traders with a short-term horizon should wait and initiate long position on a strong rally above ₹1,180 levels while maintaining a stop-loss at ₹1,165. Immediate supports are at ₹1,130 and ₹1,100. The short-term uptrend will mitigate on a decisive fall below ₹1,060 levels.

RIL reverses from a key resistance

Last week, the stock started on a positive note and extended its rally. However, it tested a key resistance at ₹900 as well as 200-day moving average. Following a false break-out (blip above ₹900), the stock started to decline and gave away its initial gains. It closed the week with gains of just 2.7 per cent. The indicators in the daily chart show mixed signals and there is a decrease in daily volume. Hence, an emphatic breakout of ₹900 is needed for an up move to ₹920 and ₹940. If the decline extends and the stock falls below the immediate support at ₹875, it can be dragged further to ₹860 and ₹840. Next important supports are at ₹826 and then at ₹800-810 zone. The stock has been on a medium-term downtrend from its July peak of ₹1,067. To alter this medium-term downtrend, it has to decisively break the trend-deciding level of ₹940 for an upmove to ₹970 levels.

Tata Steel on a strong rally

The stock of Tata Steel zoomed 18 per cent, moving past above the immediate resistance at ₹230 and the 21 and 50-day moving averages in the prior week. Backing this move, there is an increase in daily volume over the past five sessions. Moreover, the daily relative strength index has entered the bullish zone from the neutral region and the weekly RSI has entered the neutral region, displaying a positive divergence. There are signs of trend reversal in the stock. Both the daily and weekly price rate of change indicators feature in the positive zone, implying buying interest. A strong rally above the current resistance level of ₹250 will pave way from an up move to ₹265 and then to ₹280 levels. Traders with a short-term view can consider buying the stock on dips with a stop-loss at ₹235. Key supports are at ₹230 and ₹215.

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