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

Key supports to limit downside in SBI

SBI (₹242.8)

SBI tumbled 5.8 per cent last week to close just above a crucial 21-week moving average support at ₹241. Whether the stock remains above this level or not will decide the near-term move. If SBI manages to sustain above ₹241 and inches higher, a range-bound move between ₹240 and ₹265 can be seen in the short term. A strong break above ₹265 will boost the bullish momentum and take the stock higher to ₹270. Further break above ₹270 may target ₹290 and ₹300 thereafter. On the other hand, if the stock declines below ₹241 this week, the fall can extend to ₹235 or ₹230. Strong supports are seen at ₹235, ₹230 and ₹225. The downside is expected to be limited to any of these levels as fresh buying may emerge here, leading the stock to reverse higher. Such a reversal can take SBI higher to ₹245 initially. Further break above ₹245 will see the stock revisiting ₹260 and ₹265 levels. So medium-term investors can hold the long positions. Retain the stop-loss at ₹210. Accumulate longs on dips near ₹235.

ITC breaks above a key resistance

ITC (₹249.1)

ITC traded on a negative note for most part of the week. But the stock surprised the market with a huge gap-up opening on Friday on the back of the Government announcing the Goods and Services Tax (GST) rates on Thursday. Friday’s move has helped ITC break above a key resistance at ₹247 and close 3 per cent higher for the week. The price action in the coming days will determine whether the stock will continue its upmove or not. Immediate support is at ₹247. If ITC manages to sustain above ₹247, a rise to test the next resistance at ₹257 is likely. Inability to break above ₹257 may keep the stock in a sideways move between ₹257 and ₹247 for some time. But a strong break above ₹257 may strengthen the bullish momentum and take the stock higher to ₹265 or even ₹270 thereafter. On the other hand, if ITC declines below ₹247 this week, it can fall to ₹244 initially. Further break below ₹244 can drag it to ₹242 and ₹240. In such a scenario, the possibility of the stock revisiting ₹235 levels thereafter cannot be ruled out.

Infosys heads towards supports

Infosys (₹970.8)

Infosys resumed its downtrend and has tumbled 7 per cent over the last two weeks. However, the stock is nearing its crucial support levels. The 200-week moving average at ₹947 and the 50 per cent Fibonacci retracement level of the prior uptrend at ₹913 are the key levels to watch. The stock is likely to test these levels in the near term. But whether the stock of Infosys manages to reverse higher from these levels or not will decide the next move. A reversal from the above mentioned supports may trigger a corrective rally to ₹1,000 or ₹1,050 levels. But if the stock breaks below ₹913, it can extend its fall further. In such a scenario, the stock can decline further to ₹850 or even lower to ₹825 and ₹800 levels. The region between ₹825 and ₹800 is a strong long-term support for Infosys. The current downtrend is more likely to halt here if the stock falls below the level of ₹913. A strong reversal from this level would signal the beginning of a fresh leg of a long-term upmove and the stock will be a good buy from a long-term perspective.

RIL to test a significant trend support

RIL (₹1,005.8)

RIL slumped to close in the red for the fourth consecutive week. The stock tumbled over 4 per cent last week. However, it is nearing a key support at ₹990. This support is likely to be tested this week and the subsequent price action will be significant to determine the next move. A reversal from this support at ₹990 may have the potential to take the stock higher to ₹1,025. If RIL manages to surpass ₹1,025 decisively, the downside pressure will ease and a fresh rally targeting ₹1,100 levels is possible. But inability to break above ₹1,025 and a reversal from there may keep the stock range-bound between ₹990 and 1,025 for some time. On the other hand, if RIL breaks below ₹990 this week, the current downmove may intensify. Such a break can then drag the stock lower to ₹960 or even ₹930, which are the 100- and 200-week moving average support levels respectively. But the level of ₹990 is a strong long-term trend line support. On the charts, there is a strong likelihood of this trend line support to halt the fall and trigger a reversal.

Outlook for Tata Steel remains positive

Tata Steel (₹403.05)

Tata Steel turned volatile following the turmoil at the Tata Group companies. The broader view continues to remain bullish on the charts. The 55-week moving average is on the verge of crossing the 100-week moving average, suggesting limited downside for the stock. The ₹390-₹385 zone will be a key short-term support. As long as it manages to sustain above this support zone, the stock can remain range-bound but volatile between ₹385 and ₹430 for some time. An eventual breakout on either side of this range will then decide the next move. But if the stock declines below ₹385, it can fall to ₹370. Further break will heighten the pressure and drag the stock down to ₹350. The level of ₹340 is a strong support and a break below it is less likely. Short-term investors who have taken long positions near ₹400 can hold it. Retain the stop-loss at ₹365 for the target of ₹465. Investors with a medium-term prspective can hold the longs with the stop-loss at the level of ₹340.

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