Technical Analysis

Weekly trading guide: RIL in a strong uptrend

Akhil Nallamuthu | Updated on June 21, 2020 Published on June 21, 2020

SBI (₹184.5)

The stock of SBI was trading flat throughout the week. But taking the support of 21-day moving average, it rallied on Friday ending the week with a gain. The price is also above the 50-day moving average. Bouncing off from ₹170, the stock appears to have formed a higher base in the daily chart – a positive indication.

On the back of this, if the price breaks out of the crucial resistance at ₹200, the medium-term trend of the stock is likely to turn bullish as the breakout will confirm the higher high. Affirming the upward bias, the daily relative strength index is showing a fresh uptick; as a result, it has decisively moved above the midpoint level of 50.

Also, the moving average convergence divergence indicator in the daily chart remains in the positive territory. Hence, traders can be bullish and buy the stock on declines with a stop-loss at ₹168.

The 23.6 per cent Fibonacci retracement level, which falls at ₹192, can be a minor resistance. The subsequent resistance is the important level of ₹200. Above ₹200, the stock could rally to ₹218.

ITC (₹184)

Bears gain traction in ITC

The stock of ITC declined a little over 5 per cent past week, closing at ₹184 against the preceding week’s close of ₹193.9. It has closed in the red for two consecutive weeks, indicating a considerable downward momentum.

The price has slipped below the 21-day moving average, and the price action in the daily chart hints at more downside. As the stock has been weakening for the past two weeks, the daily relative strength index has been falling; it has also moved below the midpoint level of 50.

The moving average convergence divergence indicator in the daily chart, though in the bullish region, has turned its trajectory downward.

These factors show that the bears are gaining traction and the stock could extend the downswing. However, the stock has a support band between ₹176 and ₹180. The 38.2 per cent Fibonacci retracement level falls within this range, making it a significant support area.

So, traders can initiate fresh short positions with a stop-loss at ₹190 if the price breaks below ₹176. Below ₹176, the stock could depreciate to ₹160.

Infosys (₹705.5)

Infosys remains within a range

The stock of Infosys registered a marginal gain last week and closed above the important level of ₹700. The price has also inched above the 21-day moving average, giving it a bullish bias.

Nevertheless, the price action in the daily chart shows that the stock has been fluctuating between ₹650 and ₹725 for the past two months. As the price is in a horizontal trend, the moving average convergence divergence indicator in the daily chart, though in the bullish region, has largely remained flat for the past two months.

Also, the daily relative strength index, which is above the midpoint level of 50, has been flat. Since the next of leg of trend cannot be confirmed until it breaches either ₹650 or ₹725, traders can stay on the sidelines. If the stock moves past the resistance at ₹725, it could rally to ₹760.

A breakout of that level can take the stock to ₹800. On the other hand, if the stock weakens and breaches the support at ₹650, it is likely to find an immediate support at ₹620. The subsequent support is at ₹585.

RIL (₹1,759.4)

RIL in a strong uptrend

The stock of Reliance Industries is displaying a strong uptrend as it bounced from the critical support of ₹1,500, where the 21-day moving average coincides, and rallied to form a fresh lifetime high. It marked a new high of ₹1,788.8 on Friday before ending the session at ₹1,759.4, posting a gain of a little over 10 per cent for the week.

The stock seems to have resumed its strong run upwards after witnessing a sluggish period in the preceding week. The daily relative strength index, moving in tandem with the stock price, has been rising and is well above the midpoint level of 50.

The moving average convergence divergence indicator in the daily chart, which was beginning to show signs of weakness, is now showing a fresh uptick, substantiating the bull trend. Notably, it also lies in the positive region.

Considering the aforementioned factors, traders can be bullish and initiate fresh long positions on declines with a stop-loss at ₹1,630. On the upside, the stock is likely to appreciate to ₹1,850, above which it might rally to ₹1,900.

Tata Steel (₹320.5)

Tata Steel displays upward bias

The stock of Tata Steel was largely moving in a sideways trend between ₹300 and ₹320 during the past week. Thus, the price correction that the stock was witnessing during the preceding week seems to have found support at ₹300.

Notably, the price area between ₹300 and ₹310 is a good support band. The 21-day moving average and the 23.6 per cent Fibonacci retracement level lie within this range, making it a significant support band. So, the stock can be biased towards an uptrend until it remains above the support area.

Corroborating the bullish bias, the daily relative strength index is showing an uptick and remains in the bullish region. But the moving average convergence divergence indicator in the daily chart stays flat; however, it remains above the zero level, indicating an upward bias. Despite bullish indications, the stock is likely to face a minor hurdle at ₹325.

So, traders can go long on the stock with a stop-loss at ₹300 if it rallies past ₹325. Above that level, it might advance to ₹340 and ₹350.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on June 21, 2020
This article is closed for comments.
Please Email the Editor