Technical Analysis

Weekly trading guide: ITC likely to depreciate further

Akhil Nallamuthu | Updated on October 04, 2020 Published on October 04, 2020

SBI trades below key barrier

SBI (₹190.3)

After recording losses for four weeks in a row, the stock of SBI posted a gain last week as it closed at ₹190.3 versus the previous week’s close of ₹182.2. But this could be a corrective rally as the stock has been on a downtrend since the beginning of September and stays below the crucial level of ₹200.

Importantly, it has to breakout of this level to establish a sustainable uptrend. Until then, the stock could be inclined to a bear trend and rallies can be sold into. The price is below both the 21- and 50-day moving averages. The moving average convergence divergence indicator on the daily chart is in the negative territory.

Though the daily relative strength index shows an uptick following the rally last week, it remains below the midpoint level of 50. Considering the above factors, traders can take a bearish view and short the stock on rallies with a stop-loss at ₹205.

A fall from the current levels can drag the stock to the prior low of ₹175, below which it can depreciate to ₹166. Resistance from the current levels can be spotted at ₹200 and ₹205.

ITC likely to depreciate further

ITC (₹170.8)

The stock of ITC, which has been steadily falling since mid-August, was largely trading in a sideways trend throughout last week and ended on a flat note. Nevertheless, the outlook remains bearish as the price lies below the 21-day moving average and the stock has been continuously forming lower lows for the past one month.

Since the price has been declining, the daily relative strength index has been on a fall for the past one month and lies below the midpoint level of 50. Similarly, the moving average convergence divergence indicator on the daily chart is hovering in the negative territory.

The price action is bearish, and the indications are such that the stock is likely to extend the downtrend in the upcoming trading sessions. However, ₹165 is a support for the scrip. So, traders can wait for now and initiate fresh short positions on the stock if it breaches the support of ₹165; stop-loss can be at ₹180.

A breach of ₹165 can intensify the sell-off, possibly dragging the stock to ₹158 and ₹150. Notable resistances are at ₹175 and ₹181 — its 21-day moving average.

Infosys tests a resistance

Infosys (₹1,017.6)

The stock of Infosys was sluggish last week as it has been trading in a narrow range. Yet, the major trend remains bullish and the price remains above the psychological level of ₹1,000. Also, the stock is trading well above the 21-day moving average; which is at ₹975.

As long as it stays above this level, the trend will be bullish. Supporting the positive outlook, the daily relative strength index lies above the midpoint level of 50. Likewise, the moving average convergence divergence indicator on the daily chart is moving in the bullish zone.

However, for the past couple of weeks, the stock has been facing a hurdle at ₹1,030. So, even though the overall trend is positive, traders can wait for the stock to breach the resistance of ₹1,030. Traders can go long on the stock with a stop-loss at ₹960 if it decisively breaks out of ₹1,030.

On the upside, it is likely to rally past its all-time high of ₹1,037 and advance to ₹1,100. While ₹1,000 is a strong support, the price level of ₹975 can be a substantial base for the stock.

RIL retains positive bias

RIL (₹2,225.5)

The stock of Reliance Industries had been on a strong uptrend since mid-March, consistently forming higher highs and higher lows. But after registering a life-time high of ₹2,369.3 in mid-September, the stock has been gradually declining, and during the past week, it was treading just above the support band of ₹2,180 and ₹2,200, and above the 21-day moving average.

Until the stock trades above this support band, the near-term trend will remain bullish. While the daily relative strength index is above the midpoint level of 50, the moving average convergence divergence indicator on the daily chart is showing weakness as the slope is negative, even as it stays in positive territory.

Nonetheless, traders can retain a positive bias since the stock is above an important support and has not formed lower low. However, one can wait for indication of a fresh bullish momentum before going long since the recent price action looks sluggish.

Hence, traders can buy with a stop-loss at ₹2,150 if the stock rallies past ₹2,250. A resh rally can lift the stock to ₹2,300 and ₹2,360.

Tata Steel could witness a decline

Tata Steel (₹364.9)

After five weeks of decline, the stock of Tata Steel registered a marginal gain last week. However, it is trading below a key barrier of ₹375, and the price lies below the 21- day moving average.

Notably, the 21-day moving average has slipped below the 50-day moving average, indicating a potential shift in trend to bearish. Substantiating the bearish bias, the daily relative strength index is below the midpoint level of 50 and the moving average convergence divergence indicator has been charting a downward trajectory and stays in the negative territory.

The above factors indicate that the stock is inclined to downtrend, and most likely, the downswing might be extended in the upcoming trading sessions. Considering the above factors, traders can take a bearish view and initiate fresh short positions on rallies with a stop-loss at ₹390.

The nearest support can be spotted at ₹350 — the 50 per cent retracement level. The subsequent supports are at ₹332 and ₹320. On the upside, the stock has a hurdles at ₹375 and ₹390.

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Published on October 04, 2020
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