Technical Analysis

Weekly trading guide: Infosys continues to stay sideways

Akhil Nallamuthu | Updated on November 22, 2020

SBI (₹242.7)

The stock of SBI continued to trend upwards last week following considerable appreciation in the preceding week. Consequently, it has closed above the resistance of ₹242, where the 50 per cent Fibonacci retracement level of the previous downtrend lies.

Notably, the stock registered an intra-week high of ₹253 before closing the week at ₹242.7. The uptrend is intact as the price continues to make higher highs and is well above both the 21- and 50-day moving averages.

Corroborating the positive outlook, the daily relative strength index is above the midpoint level of 50, and the moving average convergence divergence indicator on the daily chart is charting an upward trajectory and lies in the positive zone. So, the stock is likely to appreciate further from the current levels and, hence, traders can go long on the stock with a stop-loss at ₹225.

On the upside, the scrip can surpass the prior high at ₹253 and head north to ₹262 — the 61.8 per cent Fibonacci retracement level. A breakout of this level can lift the stock to ₹270.

ITC (₹191.7)

The stock of ITC, after opening last week on a flat note, depreciated during the first half of the week. However, the scrip reversed direction mid-week and started to rally, ending the week marginally higher at ₹191.7.

Thus, the stock has retained the upward bias. Substantiating the same, the 21-day moving average has crossed over the 50-day moving average, indicating a potential shift in the medium-term trend to bullish; the daily relative strength index is above the midpoint level of 50 and the moving average convergence divergence indicator on the daily chart is tracing an upward trajectory and lies in the bullish territory.

Hence, the stock will most likely move higher in the upcoming trading sessions. Notably though, ₹192 is a considerable resistance where the 61.8 per cent Fibonacci retracement level of the previous downtrend lies. Considering these factors, traders can buy the stock if it decisively breaches the resistance of ₹192. The stop-loss can be placed at ₹180.

A breach of ₹192 can lift the stock to ₹200. The subsequent resistance is at ₹206.

Infosys (₹1,103.3)

The stock of Infosys drifted lower last week after facing a hurdle at ₹1,150. But it continues to stay within the consolidation range of ₹1,090 and ₹1,150, and unless the scrip breaches either of these levels, the next leg of the trend will remain uncertain.

Nevertheless, the major trend is bullish, and it will remain so until the price remains above ₹1,050. Following the sideways price action, the daily relative strength index has been flat since the beginning of November; similarly, the moving average convergence divergence indicator on the daily chart has been hovering in the neutral region.

However, both the indicators show signs of the rally losing strength. On the other hand, there are no indications of a bearish trend-reversal. Given the above factors, traders can stay on the fence until the stock moves out of the range.

While a breakout of ₹1,150 can result in the stock retesting the lifetime high at ₹1,186, a break below ₹1,090 can drag it to ₹1,050. A breach of this level can shift the direction of the trend downward and the sell-off can intensify.

RIL (₹1,899.5)

After failing to breach a resistance of ₹2,175, the stock of Reliance Industries posted loss last week as it ended the week at ₹1,899.5 versus the preceding week’s close of ₹2,002.3. This is the first weekly close below ₹2,000 since mid-July, indicating a bearish bias.

Moreover, the stock has broken below the range of ₹1,970 and ₹2,075, within which it had been trading for the past couple of weeks. Also, the 21-day moving average has crossed below the 50-day moving average. Adding to the negative outlook, the daily relative strength index is pointing downwards and has slipped below the midpoint level of 50. T

he moving average convergence divergence indicator on the daily chart is also hovering in the bearish territory. Given the aforementioned factors, traders can take a bearish view on the stock and initiate fresh short positions on rallies with a stop-loss at ₹2,000, where the 21-day moving average lies.

The scrip is likely to depreciate to ₹1,840. A breach of this level can intensify the sell-off, potentially dragging the stock to ₹1,700.

Tata Steel (₹532.9)

Extending the rally, the stock of Tata Steel appreciated last week and moved past the important level of ₹500. Following this, it marked a fresh 52-week high of ₹541.7 on Friday, before closing the week at ₹532.9. As a result, the scrip has posted gains for three weeks in a row, indicating strong positive momentum.

The price action on the daily chart is showing that the stock has been steadily gaining for the past couple of months, and the likelihood of further gains looks high. Substantiating the positive outlook, the daily relative strength index stays in the bullish territory and the moving average convergence divergence indicator on the daily chart has moved further into the positive zone, indicating considerable bull strength.

Because of the above factors, traders can take a bullish view on the stock and initiate fresh long positions on dips with a stop-loss at ₹500. On the upside, the stock will most likely test the resistance of ₹560.

A breakout of this level can intensify the rally, possibly lifting the stock to ₹585.

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Published on November 22, 2020
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