Technical Analysis

Weekly trading guide: RIL witnesses softening in price

Akhil Nallamuthu | Updated on August 02, 2020 Published on August 02, 2020

SBI (₹191.4)

The stock of SBI remained flat last week and the lack of trend is evident from the price action in daily as well as the weekly chart. For the past few trading sessions, the scrip has been fluctuating between ₹186 and ₹192 — the 23.6 per cent Fibonacci retracement level.

Not just during the past few sessions, the stock had been sluggish throughout July, largely moving between ₹182 and ₹200. An attempt to break out of the critical level of ₹200, a couple of weeks ago, was unsuccessful. Unless the stock breaches that level, it cannot establish a sustainable uptrend. On the other hand, the stock has not weakened below the price band of ₹178 and ₹182.

Because of the sideways trend, indicators such as the relative strength index and the moving average convergence divergence in the daily chart are flat. Effectively, the stock cannot be expected to take direction unless either of ₹178 or ₹200 is taken out.

So, traders can adapt range trading strategies until then. Above ₹200, the resistance is at ₹210, whereas below ₹178, the support is at ₹170.

ITC (₹194.1)

Extending the consolidation phase, the stock of ITC was charting a horizontal path last week. It has been oscillating between ₹192 and ₹200 since early July. Prior to that, the stock was in a bull trend, and it is now struggling to cross over the psychological level of ₹200.

A word of caution: the longer the consolidation phase, the higher the chances of the stock running into a bear trend. Loss in momentum can be witnessed from the daily relative strength index, which has been on a decline since it peaked in early July. Similarly, the moving average convergence divergence indicator has been descending and is now hovering around the zero level.

A break below this level is an indication of a possible bear trend. So, the sooner the stock rallies above ₹200, the better for the bulls. Nevertheless, since the price is held between ₹192 and ₹200, the near-term outlook remains uncertain.

For this reason, traders can stay on the fence until either of the above-mentioned levels are breached. While ₹210 can be the nearest hurdle above ₹200, the support below ₹192 is at ₹180.

Infosys (₹966)

The bulls do not seem to be giving up any time soon as the stock of Infosys surged last week and recorded a fresh lifetime high of ₹986.4 on Friday. The stock ended July on a high and is nearing the important level ₹1,000, which can really test the resolve of the bulls.

Given the current upward thrust, the scrip can ease above that level in all likelihood. Strong momentum can also be seen from how the price diverges from the 21-day moving average on the upside and the stock continues to hit new highs. Corroborating the bullish view, the moving average convergence divergence indicator keeps tracing the upward trajectory.

However, the relative strength index is not as keen to make fresh peaks. While this, in general, can be taken as a sign of caution, unless there is any weakness indicated by the price action, one can continue to retain the bullish outlook.

Taking the above factors into account, traders can initiate fresh long positions on declines with a stop-loss at ₹900. While ₹1,000 can be a hindrance, subsequently, it can rise to ₹1,040.

RIL (₹2,067.1)

After closing in the green for four consecutive weeks, the stock of Reliance Industries posted a loss as it closed at ₹2,067.1 on Friday compared with the preceding week’s close of ₹2,146.1.

Nonetheless, the depreciation began after it registered a new all-time high of ₹2,198.8 on Monday. It is natural for any bull trend to face intermittent corrections. So, in this case, too, it could probably be just another retracement. The supportive arguments are that the overall trend continues to be bullish, and the price remains above ₹2,000 and the 21-day moving average.

Following the price moderation, the daily relative strength index is showing a fresh downtick. However, it remains above the midpoint level of 50. Though the moving average convergence divergence indicator is clinging on to the positive slope, it seems to be flattening of late.

However, the major trend is in favour of the stock and it is likely to move up. So, traders can buy the stock with a stop-loss at ₹1,950. It is likely to test ₹2,200, above which it can rally to ₹2,250.

Tata Steel (₹366.3)

The stock of Tata Steel has been slowly but steadily gaining over the past two months. Consequently, the price marked a four-month high of ₹378.4 last Wednesday, and the stock continues to form higher peaks and higher troughs — an indication of positive momentum.

As the bulls are not in a rush, the indicators are moving slowly, but in favour of the stock. The daily relative strength index has been moving up in tandem with the stock price. Likewise, the moving average convergence divergence indicator in the daily chart lies in the bullish territory, and is pointing upwards.

Markedly, ₹370 is a considerable hurdle as the 50 per cent Fibonacci retracement level coincides with the resistance. So, it might not be prudent to buy the stock until that level is decisively breached. Traders can initiate fresh long positions with a stop-loss at ₹345 if the stock breaks out of ₹370.

On the upside, the stock will face a resistance band between ₹390 and ₹400.. A breach of ₹400 can intensify the rally, possibly taking it to ₹420 fairly quickly.

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Published on August 02, 2020
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