Technical Analysis

Weekly trading guide: Short-term outlook positive of ITC

Akhil Nallamuthu | Updated on November 15, 2020 Published on November 15, 2020

SBI (₹229.6)

The stock of SBI witnessed a positive opening last week and rallied to register an intra-week high of ₹239.3. But then the scrip reversed and retested the support at ₹220. However, the price rebounded from that level towards the end of the week, closing at ₹229.6.

Nevertheless, the trend remains bullish and there are no signs of a reversal. The price stays well above the 21-day moving average, retaining the positive outlook. Corroborating the same, the daily relative strength index remains in the bullish territory. The moving average convergence divergence indicator on the daily chart has been tracing an upward trajectory, and also lies in the bullish zone.

Because of the above reasons, traders can take a bullish view and buy the stock on declines with a stop-loss at ₹215. Most probably, the stock is likely to rally from the current level and head towards the resistance at ₹242.

A breakout of this level can take the stock to ₹262 — the 61.8 per cent Fibonacci retracement level of the prior downswing. From the current level, the nearest support can be spotted at ₹220 and ₹210.

ITC (₹188.6)

Extending the rally, the stock of ITC appreciated last week following a positive close in the preceding week, making its biggest weekly gain since May this year. Thus, it has closed in the green for two straight weeks. Also, the price has crossed over both the 21- and 50-day moving averages.

These are indications of a strong upward momentum — thus, the likelihood of the stock moving further up is high. Substantiating the bullish view, the daily relative strength index is pointing up sharply and lies above the midpoint level of 50. The slope of the moving average convergence divergence indicator on the daily chart is positive and lies in the positive territory.

Considering the above factors, traders can take fresh long positions on dips with a stop-loss at ₹178. On the upside, the nearest hurdle can be ₹192 — the 61.8 per cent Fibonacci retracement level of the previous downtrend. Since the upward momentum is strong, the stock can breach this level with ease and touch the ₹200 mark.

The subsequent resistance can be spotted at ₹206. The stock can be inclined to uptrend until the price remains above ₹180. Below this level, the support is at ₹175.

Infosys (₹1,133.4)

The stock of Infosys, which has been on a strong uptrend since April, witnessed a correction in the second half of October. As a result, the stock that registered its all-time high at ₹1,186, declined and touched a low of ₹1,050. Subsequently, it advanced a bit and started moving in a sideways trend.

The scrip has largely been consolidating within ₹1,090 and ₹1,150 for the past two weeks. So, even though the major trend is bullish, the next leg of price swing will remain uncertain until either ₹1,090 or ₹1,150 is breached. The relative strength index and the moving average convergence divergence indicator on the daily chart stay in their respective positive territories.

However, both the indicators shows signs of the rally losing strength. On the other hand, there are no indications for a bearish trend- reversal as well. Given the above factors, traders can stay on the fence until the stock moves out of the range.

While a breakout of ₹1,150 can result in the stock retesting the lifetime high at ₹1,186, a break below ₹1,090 can drag it to ₹1,050 — the 50-day moving average.

RIL (₹2,002.3)

Since late March, the stock of Reliance Industries has rallied sharply. But after marking its lifetime high of ₹2,369.3 in mid-September, the stock started to consolidate. Following this, it declined and registered a low of ₹1,840 a couple of weeks ago.

However, the stock recovered swiftly and moved above the key level of ₹2,000, and has been hovering around the 21-day moving average, which currently lies at ₹2,025. Even though the stock has bounced from its recent low and the major trend is bullish, the resistance at ₹2,075 can be significant for the bulls.

That is, a breakout of this level is needed for the bulls to establish the next leg of rally. The daily relative strength index is showing a fresh uptick but stays below the midpoint level of 50; the moving average convergence divergence indicator on the daily chart is flat.

Considering the above factors, traders can now remain on the sidelines and buy the stock with a stop-loss at ₹1,970 if it decisively breaks out of ₹2,075. Above this level, the stock can appreciate to ₹2,180 and then possibly to ₹2,250 in the near term.

Tata Steel (₹492.2)

Bulls continue to dominate the stock of Tata Steel as it continues to register higher highs. Last week, the uptrend gained steam and the scrip rallied past the prior high of ₹443.6 and wrapped up the week at ₹492.2. Thus, the stock is hovering around the crucial level of ₹500 and a breakout of this level can intensify the rally.

The price is well above the 21-day moving average and notably; it has crossed over the 50-day moving average — a bullish indication. Substantiating the positive trend, the daily relative strength index has been rising in tandem with the price and the moving average convergence divergence indicator on the daily chart has moved further up in the positive territory.

Even though the major trend is bullish and the momentum is in its favour, traders need to be cautious about the resistance at ₹500 since the stock might witness some profit-booking.

Hence, one can either buy the stock with a stop-loss of ₹477 if it breaks out of ₹500 or buy with a stop-loss at ₹450 if the price softens to ₹475. Resistance levels above ₹500 are at ₹530 and ₹550.

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Published on November 15, 2020
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