Technical Analysis

Weekly Trading Guide: SBI might extend the decline

Akhil Nallamuthu | Updated on March 08, 2020

SBI (₹270.5)

The stock of SBI tumbled throughout the past week, and on Friday it registered a five-month low of ₹253.95. The trend during the preceding week was already on the downside and the price remained below both the 21- and 50-day moving averages as the stock continued to exhibit a bearish bias. The stock has thus closed with a loss for the second consecutive week hinting that the bears are gaining traction. Substantiating the downtrend are the oscillators in the daily chart. The relative strength index has come down sharply along with the price, showing considerable strength in the bearish trend. On the other hand, the moving average convergence divergence indicator has extended further into the bear zone, indicating a significant downward momentum. Since the overall trend is bearish and there are no signs of a reversal, traders can continue to take bearish view and short the stock on rallies. Place stop-loss at ₹295. On the downside, the supports are identified at ₹260 and ₹248, which can be the potential targets. The nearest resistances from the current market price are at ₹283.5 and ₹292.

ITC (₹181.7)

ITC trading near multi-year support

There was no respite for the stock of ITC as it continued its downtrend during the past week. On Friday, it marked a fresh 52-week low of ₹179.75, before ending the week marginally higher at ₹181.7. Notably, the stock is in a striking distance from its multi-year low of ₹178.66. The downward momentum seems to be steady and the price remains well below both the 21- and 50-day moving averages. The stock has been posting losses for the past several weeks, indicating a strong bearish momentum. The daily relative strength index continues to fall despite being in the over-sold conditions, hinting at a strong downtrend. The moving average convergence divergence indicator in the daily chart shows that the bears have started to regain momentum, meaning more downside in the coming days. Considering these factors, traders can maintain a bearish view on the stock, but sell the stock with a stop-loss at ₹190 if it slips below ₹178.6. Below that level, support levels can be spotted at ₹168 and ₹155, which can be near term targets. On the upside, the crucial levels are at ₹195 and ₹200.

Infosys (₹738.9)

Infosys trading above a support band

One of the few scrips that showed resilience during the recent market downfall was the stock of Infosys. In fact, the stock closed marginally higher, bucking the overall market trend. The price band between ₹720 and ₹730 is acting as a substantial support, arresting the decline. But otherwise, there are no bullish indications. The price remains below both 21- and 50-day moving averages and the daily relative strength index is below the mid-point level of 50 despite a recent uptick. Also, the moving average convergence divergence indicator is in the bearish zone. Moreover, on the upside, ₹760 is a resistance. The 50-day moving average coincides at that level, making it an important level. So, traders can stay on the fence until a bullish confirmation. One can go long in the stock with a stop-loss at ₹720 if it breaks out of ₹760. In such case, the stock can potentially rally to the critical level of ₹800 and might get extended to the previous high of ₹811. Above that level, ₹830 could act as a hindrance. Support below the price band between ₹720 and ₹730 can be spotted at ₹700.

RIL (₹1,271)

Outlook remains bearish for RIL

The stock of Reliance Industries (RIL) was largely moving in a sideways trend between ₹1,300 and ₹1,370 during the past week. But on Friday, as the selling pressure intensified across the market, the stock declined and closed with a loss for second consecutive week. The stock marked a six-month low of ₹1,241 on Friday, before recovering marginally and closing at ₹1,271. The trend remains bearish and the price is well below the 21- and 50-day moving averages. The moving average convergence divergence indicator in the daily chart has deepened into the bearish territory, indicating a considerable selling momentum. The daily relative strength index has declined further, moving in tandem with the price. Notably, it has entered the over-sold levels. Considering these reasons, the price may to weaken further. . Rather than initiating fresh shorts at current levels, short the stock with a stop-loss at ₹1,370 if it rallies to ₹1,300 for a better risk-reward ratio. On the downside, ₹1,240 and ₹1,200 are the supports, which can be the targets. On the other hand, considerable resistances are at ₹1,300 and ₹1,370.

Tata Steel (₹351.5)

Tata Steel in a considerable downtrend

The stock of Tata Steel slumped during the past week as it witnessed a significant selling pressure. With the recent fall, the stock has given up most of the gains that it shored up between October and December last year. Over the past two weeks, bears seem to have gained traction and the price action in the daily chart has been forming lower peaks and lower troughs, indicative of a considerable downtrend. On Friday, the stock recorded a fresh five-month low of ₹346.65 before ending the session a little higher at ₹351.5. The moving average convergence divergence indicator is hinting at a strong downtrend and it continues to extend the downward trajectory. But, the daily relative strength index, lies in the over-sold zone and when price registered a new low, the RSI did not replicate it. This might indicate that bears have started to lose traction. However, the overall trend remains bearish. Hence, traders can sell the stock if it breaks below the nearest support level of ₹345. Stop-loss can be at ₹370. The near term targets can be at ₹324 and ₹300.

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

Published on March 08, 2020