Weekly trading guide: SBI is in a sideways range

SBI (₹319.4)

The stock of SBI has largely been trading between ₹310 and ₹325 for the past three weeks. The stock registered a one-month high of ₹331.8 last week, before closing at ₹319.4. Though the candlesticks in the weekly chart indicate that the stock is seeing a reasonable buying interest, ₹325 is acting as a major hurdle on the upside.

But the stock price remains above the 21-day moving average, hinting that the short-term trend is inclined towards the bulls. Supporting the positive outlook, the daily relative strength index is above the mid-point level of 50. Also, the daily moving average convergence divergence indicator is exhibiting an upward bias. Traders can buy the stock with a stop-loss at ₹310 if the price rallies past ₹325. On the other hand, initiate fresh long position with a stop-loss at ₹295 if the price moderates to ₹310.

This level is a crucial support as it coincides with the 38.2 per cent Fibonacci retracement level of the prior downtrend. The resistance levels above ₹325 are at ₹338 and ₹343, which can be the potential targets for the long positions.

ITC (₹207.7)

The bearish trend in ITC continues as the stock closed with a loss, for the fourth consecutive week. The stock has already lost around 12 per cent year-to-date and the price remains well below the 21- and 50-day moving averages. The recent price action in the daily chart may imply that the stock is heading for a consolidation phase, but the momentum with which the stock has been declining recently suggests that there could be more downside.

And, until the stock stays below the resistance at ₹223, the chances for a sustainable recovery are slim. The moving average convergence divergence indicator in the daily chart has extended further into the bearish territory, indicating a considerable downward momentum. But the daily relative strength index is near the over-sold levels.

The nearest support is at ₹205, around which the stock is currently trading. So, traders can sell the stock with a stop-loss at ₹215, only if it breaks below ₹205. Alternatively, one can sell with a tight stop-loss if the price rallies to ₹220. Support levels can be spotted at ₹196 and ₹188.

Infosys (₹786.4)

The stock of Infosys rallied last week and attempted to break out of the critical resistance at ₹800. Unable to breach the resistance, the stock price softened and closed at ₹786.4. It had registered an intra-week high of ₹799.2. But the recent trend has been bullish and the price remains above both the 21- and 50-day moving averages — an indication of bull trend.

Also, until the price trades above ₹760, a bearish trend-reversal might not happen. However, there are indications of weakness in the uptrend. The daily relative strength index, which remains above the mid-point level of 50, is not showing an uptick despite the rally in price. On the other hand, the moving average convergence divergence indicator in the daily chart is flat.

Since the stock is facing a considerable resistance at ₹800 and there are signs of uptrend losing strength, traders can wait for the stock to breach that level before initiating long positions. Fresh long positions with a stop-loss at ₹775 can be initiated if the stock rallies past ₹800. Potential targets are at ₹832 and ₹847.

RIL (₹1,487.6)

The stock of Reliance Industries (RIL) rallied last week and has closed in the green for the second consecutive week. In the weekly chart, the price action hints that the bull trend might have resumed after a correction. The price has closed above the 21-day moving average, confirming that the near-term trend has become bullish.

Also, the daily relative strength index has been rising along with the stock price and has moved above the midpoint level of 50 — an indication of bulls gaining strength. The moving average convergence divergence indicator in the daily chart is also showing renewed upward momentum. However, the stock faces a resistance at ₹1,500.

The 50-day moving average coincides at that level, making it a significant level. So, despite the bullish inclination, fresh long positions are not recommended until the price trades below ₹1,500. Traders can buy the stock with a stop-loss at ₹1,450 if it decisively breaks out of ₹1,500. On the upside, the resistance levels are at ₹1,550 and ₹1,575, which can be the potential short-term targets.

Tata Steel (₹434.5)

The downward pressure was evident as the stock of Tata Steel witnessed a gap down opening. It then continued to decline, resulting in the 21-day moving average crossing below the 50-day moving average. This can be an indication of the medium-term trend turning negative. Corroborating the bearish outlook, the daily relative strength index is showing a fresh downtick and has slipped below the midpoint level of 50.

The moving average convergence divergence indicator in the daily chart is hinting at a weak outlook as it lies in the bearish zone. However, the stock has not fallen decisively below the support at ₹435. At this level lies the 38.2 per cent Fibonacci retracement level of the previous uptrend, making it a good support.

Considering this, it is recommended to initiate fresh short positions only below ₹430. Place the stop-loss at ₹460. If the price falls below ₹430, the immediate support can be seen at ₹415, from where the stock rebounded during the first week of this month. Below that level, the stock can fall to ₹392.