Technical Analysis

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

Gurumurthy K | Updated on January 17, 2018 Published on July 02, 2016






SBI (₹219.65)

SBI has breached the resistance at ₹218 and has surged to close 4 per cent higher. The outlook is bullish. Immediate support is around ₹215. Next strong short-term supports are in the ₹209-₹208 zone and then at ₹204. The 200-week moving average at ₹226 is the immediate resistance , which can be tested this week. A strong break above this hurdle can take the stock higher to ₹230 and ₹233 in the short term. Such a rally will also confirm the trend reversal in this stock. The stock will thus have the potential to rise to ₹250 or even ₹260. Investors with a medium-term perspective can go long at current levels. Stop-loss can be placed at ₹199 for the target of ₹255. Intermediate resistance is between ₹245 and ₹250. A corrective fall from this resistance is possible before the stock moves ahead to reach the target. This can be used as an opportunity to accumulate longs by investors. The region between ₹205 and ₹200 is a strong medium-term support. The outlook for the stock will turn negative only if it declines below ₹200.

ITC (₹252.35)

Five weeks of sideways consolidation in ITC ended last week. The stock surged 7 per cent, breaking beyond the upper end of the range at ₹243 (price adjusted for a 1:2 bonus issue) to close on a buoyant note at ₹252.3 for the week. The region between ₹245 and ₹243 and then ₹240 are the important supports that can limit the downside in the stock in the short term. Dips to these supports can attract fresh buying interest. A rise to test the next resistance at ₹268 looks likely in the short term. Inability to break above ₹268 in the first attempt can trigger a corrective fall to ₹260 or even lower. However, a subsequent strong break above this resistance level can take the stock to ₹290 or even higher over the medium term. Investors with a medium-term perspective can go long. Stop-loss can be kept at ₹237 for the target of ₹285. The 21-day moving average around ₹240 is a key support for the stock. The outlook will turn negative only if ITC declines below this support. But such a sharp fall looks less probable at the moment.

Infosys (₹1,172.1)

Infosys opened last week on a negative note with a huge gap-down. The stock was broadly range-bound and closed around 2 per cent lower for the week. Last week’s candle reflects indecisiveness. The stock is stuck below ₹1,200 and has been struggling to break above this psychological level over the last three weeks. As long as the stock trades below ₹1,200, a fall to test the 200-day moving average at ₹1,145 cannot be ruled out. This is a very important support level to watch. A strong break below this support can drag the stock lower to ₹1,130 or even ₹1,120 in the short-term. On the other hand, a reversal from the 200-day moving average support can trigger a corrective rally to ₹1,200. Only a decisive weekly close above ₹1,200 will ease the downside pressure. However, the outlook will turn positive only if Infosys records a strong daily close above ₹1,215. Such a break will open doors for a rally to revisit ₹1,250 and ₹1,270 levels. Traders can stay away from this counter until a clear trend emerges.

RIL (₹973.65)

RIL is stuck in a broad sideways range between ₹925 and ₹995 for two months now. Only a strong break on either side of ₹925 or ₹995 will decide the next leg of move. The 21-week moving average at ₹987 is a key resistance within this sideways range. A strong weekly close above this level will increase the possibility of the stock breaking the range above ₹995. Such a break will wipe out the chances of a further fall in the stock and take it higher to ₹1,050 and ₹1,070 over a short- to medium-term time frame. On the other hand, a trend line support at ₹940 will be a key level to watch within the range. A strong weekly close below this level will increase the likelihood of the stock declining below ₹925. A fall below ₹925 can drag RIL lower to test the crucial support at ₹910, which will be the next trend-deciding level. A reversal from this support can keep the stock range-bound between ₹900 and ₹1,000 for some time. But a strong fall below ₹910 will increase the danger of the stock tumbling to ₹850 or ₹830 over the medium term.

Tata Steel (₹327.35)

Tata Steel rose 4.7 per cent last week. The key support in the ₹300-₹295 zone has held well and the reversal in the past week keeps the medium-term bullish outlook intact . The 100-week moving average at ₹335 and a trend-line resistance at ₹338 are the important levels that can be tested this week. A strong break above these hurdles will ease the downside pressure and take the stock higher to ₹350 and ₹353 in the short term. Such a rally will also be a first sign indicating the end of the corrective fall that has been in place from the April high of ₹364. On the other hand, if the stock fails to break above ₹338 and reverses lower, it can fall to ₹325 and ₹320 in the near term. In such a scenario, Tata Steel can trade in a sideways range between ₹295 and ₹338. The downside in the stock can be limited to ₹288 — the 50 per cent Fibonacci retracement support level, even if it declines below ₹295. So medium-term investors can continue to hold the long positions with the same stop-loss at ₹285.

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Published on July 02, 2016
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