Technical Analysis

Weekly trading guide: RIL comes off its recent high

Akhil Nallamuthu | Updated on May 17, 2020

SBI (₹166.4)

The stock of SBI, which opened flat last week, witnessed a mid-week gap-up. However, the stock gave up the gains and declined in the second half of the week. As a result, on a weekly basis, the stock closed almost flat at ₹166.4 .

Rallies being sold are indications of considerable selling interest which could drag the price lower from current levels. Notably, the stock registered a fresh one-year low of ₹160.8 last Tuesday, which is also the lowest price since February 2016. Bearish trend is indicated by the daily relative strength index.

It lies below the midpoint level of 50 and shows a fresh downtick. The moving average convergence divergence indicator, though flat, remains in the negative region. Also, the price stays well below the 21- and 50-day moving averages. On the back of above factors, traders can sell the stock on rallies with a stop-loss at ₹180.

On the downside, the stock might find a base in the form of a a support band between ₹150 and ₹156. A break below ₹150 can drag the stock to ₹140.

ITC (₹164.6)

The stock of ITC, after a flattish open last week, bounced back on Wednesday after taking support at ₹158. It, however, faced a stiff resistance at ₹174 — its 21-day moving average.

Also, ₹175 is an important level, and for the stock to establish a strong rally, it should break out of it. But the stock managed to close the week marginally higher at ₹164.6 versus the the preceding week’s close of ₹158.2.

The moving average convergence divergence indicator in the daily chart is in the negative region and the indicator has been gradually turning its trajectory downwards. Also, the daily relative strength index is below the midpoint level of 50.

Since there are considerable bearish indications, one can consider selling the stock. But ₹158 can act as a support. Hence, traders can initiate fresh short positions if the stock slips below ₹158. The stop-loss can be placed at ₹168.

The immediate support below ₹158 can be spotted at ₹146. Below that, the stock might decline to ₹134.6.

Infosys (₹652.3)

The stock of Infosys attempted to advance during the first half of last week. However, it faced a strong resistance at ₹700 and started to decline, ending the week at ₹652.3. Thus, the stock posted a loss for a second consecutive week, indicating build-up of selling interest.

But the stock has a support at ₹650, where the 50-day moving average lies, making the support stronger. Further, the price action is showing that the stock is oscillating between ₹650 and ₹700. The daily relative strength index is showing a fresh downtick and has slipped below the midpoint level of 50; nd the moving average convergence divergence indicator is turning its trajectory downwards.

These factors indicate a potential downtrend. But until the stock remains within ₹650 and ₹700, it is difficult to gauge the trend. So, traders can remain on the sidelines until either of these levels are breached.

The resistance above ₹700 are at ₹725 and ₹760, whereas the support below ₹650 are at ₹615 and ₹600.

RIL (₹1,459.4)

The stock of Reliance Industries declined through last week. It ended the week at ₹1,459.4 after registering an intra-week low of ₹1,415.1 on Friday. At ₹1,415.1 lies the 21-day moving average, which is a key support.

Also, the stock has fallen below the important level of ₹1,500 and there are signs of further weakness. The daily relative strength index, though above the midpoint level of 50, has taken a downward path. The moving average convergence divergence indicator in the daily chart has turned the trajectory downwards, indicating a potential trend-reversal.

But the 21-day moving average at ₹1,415, along with ₹1,400, can be a good support zone that can possibly arrest further decline. So, despite bearish indications the stock can be expected to fall only if it breaks below ₹1,400.

So, traders can initiate fresh short positions with a stop-loss at ₹1,470 if the stock slips below ₹1,400. The nearest support can be spotted at ₹1,365 with the subsequent support at ₹1,320.

Tata Steel (₹273.4)

The stock of Tata Steel extended its consolidation phase last week. That said, the stock has been in a sideways trend for a little over two months. It has been fluctuating between ₹250 and ₹300. Unless it breaches either of these levels, the next leg of trend will be uncertain.

Following the horizontal price trend, the daily relative strength index remains flat. The moving average convergence divergence indicator in the daily chart is now flattening, indicating that the bulls might have started to give up.

Also, the price remains below both the 21-and 50-day moving averages, showing a bearish bias. In any case, until the price oscillates within ₹250 and ₹300, the stock cannot be expected to trend, and so traders can adopt a range-trading strategy until either of those levels are breached.

Above the upper boundary of the range, the resistance levels can be spotted at ₹325 and ₹345. The support levels below the lower boundary of the range are at ₹240 and ₹225.

Published on May 17, 2020

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