Technical Analysis

Weekly trading guide: RIL retains upward bias

Akhil Nallamuthu | Updated on June 28, 2020 Published on June 28, 2020

File photo   -  istock.com/SARINYAPINNGAM

SBI (₹184.6)

The stock of SBI, which opened on a positive note last week, faced a hurdle at ₹192 – the 23.6 per cent Fibonacci retracement level of the previous downtrend. Unable to crack that level, the price moderated and the stock ended the week at ₹184.6.

But the bullish bias remains as the stock stays above the support of ₹180, where the 21-day moving average lies. The 21-day moving average has crossed over the 50-day moving average, turning the outlook positive.

However, for the scrip to establish a sustainable rally, it should breach the critical resistance at ₹200. The daily relative strength index, though above the midpoint level of 50, is flat. But the moving average convergence divergence indicator in the daily chart is on an upward trajectory and has entered the positive territory.

Considering these factors, even though the trend is upward-biased, traders can buy the stock after it breaches the resistance at ₹192. The stop-loss can be at ₹180. Above ₹192, the stock is likely to appreciate to ₹200. A breakout of ₹200 can invite more bulls, taking the stock to ₹218.

ITC (₹195.2)

The stock of ITC rallied last week after taking support of the 50-day moving average, thereby arresting the decline which had been in place during the preceding two weeks. Though it rallied throughout the week, it faced a resistance at ₹208 on Friday and dropped.

Nevertheless, the price remains above both the 21- and 50-day moving averages, giving it a positive view. Corroborating this view, the daily relative strength index is showing a fresh uptick and has moved above the midpoint level of 50. Also, the moving average convergence divergence indicator in the daily chart, which was on a decline for the past few trading sessions, is now turning its trajectory upwards; it already lies in the bullish region.

Moreover, the stock has formed a higher base in the daily chart, indicating a considerable upward momentum. However, the stock has resistances at ₹200 and ₹208.

So, traders can go long on the stock with a stop-loss at ₹190 if the price rises above ₹208. A breakout of this level can take the stock to ₹212. Above this level, ₹218 can be a strong hurdle.

Infosys (₹748.2)

The stock of Infosys, which had been largely consolidating between ₹650 and ₹725 for the past two months, broke out of the range last week. This has opened the door for further strengthening.

On Friday, the stock registered a three-month high of ₹751.6 before ending the week at ₹748.2. It has also moved well above the 21- and 50-day moving averages, indicating a considerable bullish momentum. As a result, the daily relative strength index is showing a fresh uptick and remains above the midpoint level of 50.

The moving average convergence divergence indicator in the daily chart, which was pointing downwards during the past two weeks, is turning its trajectory upwards. As many factors hint at a possible strengthening of the stock, traders can initiate fresh long positions on dips with a stop-loss at ₹685.

On the upside, the scrip could face hindrance in the form of a resistance band between ₹800 and ₹815. Above these levels, the stock will most likely retest its 52-week high at ₹847, a breakout of which can lead to a quick rally to ₹900.

RIL (₹1,741.6)

The bulls seem to have gone for a break as the stock of Reliance Industries was moving in a narrow range last week, after having rallied sharply in the preceding week. Nonetheless, the trend remains positive, and as long as the price stays above ₹1,600, the stock can be biased towards the upside.

Notably, the 21-day moving average lies at ₹1,616, which can be a good support. However, one should be cautious about indications of weakness. For instance, the daily relative strength index, though above the midpoint level of 50, was unable to form new highs like the stock price. And, the price action in the daily chart hints at selling interest as the stock attempts to rally.

But the moving average convergence divergence indicator is in favour of the stock as it remains in the bullish region and retains its upward trajectory. So, despite the trend being bullish, traders should exercise caution until there is a clear signal of a fresh round of rally.

Considering this, buy the stock with a stop-loss at ₹1,680 if it decisively breaks out of ₹1,800. The stock might rally to ₹1,900.

Tata Steel (₹323.8)

The stock of Tata Steel went up in the first half of last week and inched above the minor hurdle at ₹325. However, unable to sustain, the stock depreciated towards the end of the week, closing at ₹323.8 on Friday.

Nevertheless, it remains above the support band of ₹300 and ₹310. The 23.6 per cent Fibonacci retracement level lies within this range, making the price area a considerable base. So, the stock can be biased towards an uptrend until it remains above the support area.

This is substantiated by the fact that both the relative strength index and the moving average convergence divergence indicator, despite being flat in the daily chart, lie in their respective bullish regions. Also, the price is above the 21-day moving average and the price action in the daily chart shows that the stock has formed a higher base.

Considering these factors, traders can initiate fresh long positions if the stock rallies past ₹325. The stop-loss can be at ₹300. Above ₹325, the stock might appreciate towards the resistances at ₹340 and ₹340.

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Published on June 28, 2020
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