Technical Analysis

Weekly trading guide: Outlook turns positive for SBI

Akhil Nallamuthu | Updated on November 08, 2020

SBI (₹219.2)

The stock of SBI appreciated through last week after rebounding from the support of ₹190. As a result, the stock, which moderated during the week before last week, seems to have turned the outlook positive by rallying past key levels of ₹200 and ₹206.

The price is now above the psychological level of ₹200 and crossed over both 21- and 50-day moving averages. The daily relative strength index has been rising in tandem with the price, indicating considerable strength in the rally.

Also, the moving average convergence divergence indicator on the daily chart has taken an upward trajectory; it currently lies in the bullish zone. The above factors provide a positive outlook, signalling further appreciation in price. Hence, traders can be bullish and initiate fresh long position on declines with a stop-loss at ₹200.

A rally from here can take the stock towards its prior high of ₹231.5. A breakout of this level can possibly lift the stock to ₹242, where the 50 per cent Fibonacci retracement of the prior major downtrend lies. On the downside, the support levels are at ₹212, ₹206, and ₹200.

ITC (₹173.9)

The stock of ITC has been in the grip of bears since mid-August. The price declined from ₹200 levels and registered a low of ₹163.3 at the end of October. However, the stock witnessed a considerable appreciation in price last week, which seems to be a promising attempt by the bulls to turn the tide in their favour.

It rallied past the 21-day moving average, and for a brief period, was trading above the crucial level of ₹175 on Friday. At this level lies the 50-day moving average. This means, the bulls are yet to decisively breach the key hurdle. But there are positive indications that support the bullish view.

The daily relative strength index has moved up and is now above the midpoint level of 50; the moving average convergence divergence indicator on the daily chart has been charting an upward trajectory. Considering the above factors, traders can be bullish.

But since ₹175 can be a hindrance, one can wait for now and go long on the stock with a stop-loss at ₹165 if it breaks out of this level. The nearest resistance levels are at ₹181 and ₹188.

Infosys (₹1,112.7)

The stock of Infosys, which has been rallying strongly since April, entered a corrective phase in the second half of October. After marking a lifetime high of ₹1,186 in mid-October, the scrip gradually softened, and the price depreciated to ₹1,050 levels by the end of last month.

This price point coincides with the 50 per cent Fibonacci retracement level of the previous leg of uptrend. This acted as a support against which the stock bounced last week. While the recovery could open the door for bulls to build on more momentum, there is a resistance at ₹1,120.

So, a breach of this level is necessary for the rally to be sustainable. Supporting the positive bias, the daily relative strength index is now pointing upwards and has crossed over the midpoint level of 50. The moving average convergence divergence indicator on the daily chart, which has been on a descent, is now showing signs of recovery.

Since ₹1,120 is a resistance, traders can go long with a stop-loss at ₹1,070 if it breaks out of ₹1,120. Above this level, it can advance to ₹1,155 and ₹1,186.

RIL (₹2,029.1)

Bucking the overall market sentiment, the stock of Reliance Industries declined sharply during the first half of the week. It had fell during the preceding week as well. However, it was quick to reverse the trend as it bounced off from the support of ₹1,840.

This means the stock was trading below the trend defining level of ₹2,000 briefly. In the latter half of the week, the stock rallied and managed to get back above the ₹2,000 mark, keeping the major trend upwards. With that rally, on the weekly chart, the stock has formed a dragonfly doji — hinting a bullish trend reversal.

The indicators, too, show signs of further appreciation. That is, the daily relative strength index is now showing a sharp up-tick after falling for two straight weeks. Similarly, the moving average convergence divergence indicator on the daily chart, which has been charting a downward trajectory, is signalling a bullish reversal.

On the back of this, traders can take a positive view on the scrip and initiate fresh longs on declines with a stop-loss at ₹1,940. The stock can appreciate to ₹2,175. Subsequent resistance is at ₹2,225.

Tata Steel (₹426.5)

The stock price of Tata Steel depreciated in September after marking a high of ₹443.6. The decline dragged the stock towards ₹340 levels from where it regained upward momentum and started to rally.

Following this, the stock entered a sideways trend towards the end of October and was largely oscillating within ₹400 and ₹415. Consequently, for the most part of last week, the stock was trading sluggish. But on Thursday, the stock broke out of the range, opening the door for further appreciation.

On the daily chart, the stock looks bullish; substantiating this outlook, the daily relative strength index is showing a fresh uptick. Also, the moving average convergence divergence indicator is indicating a renewed upward momentum. Moreover, the 21-day moving average has crossed over the 50-day moving average — a bullish indication.

Considering the above factors, traders can buy on declines with a stop-loss at ₹395. The stock will most likely retest the previous of ₹443.6. A breakout of this level can take the stock to ₹460.

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Published on November 08, 2020
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