Weekly trading guide: Tata Steel faces critical resistance

SBI (₹193.2)

The stock of SBI was charting a sideways trend throughout the past week and ended the week at ₹193.2, marginally higher compared with the preceding week. The stock still oscillates within two key levels of ₹173.5, its lifetime low, and ₹200. But until the price stays below ₹200, the uptrend of the stock can be weak and may not sustain.

The 21-day moving average lies around current levels, ie, at ₹193.6. Despite the stock being in a sideways trend, the daily relative strength index has been inching up. But it remains below the mid-point level of 50, possibly indicating that the bull trend has not gained enough strength to establish a strong rally.

The moving average convergence divergence too is in an upward trajectory, but is still in the bearish region. However, it shows signs of the momentum turning in favour of the bulls. Nevertheless, the price is flat, and it should breach either ₹173.5 or ₹200 to confirm the next leg of trend.

So, traders can stay on the fence until then. Above ₹200, the resistance is at ₹215, whereas below ₹173.5, the stock might fall to ₹160.

ITC (₹188.1)

The stock of ITC has been rallying for the past three weeks. Following this, it appreciated last week and closed marginally above an important level of ₹186. That level is significant as the 50 per cent Fibonacci retracement level and the 50-day moving average coincide at that price point.

This might be an indication of the medium-term trend turning bullish. The bullish trend is also corroborated by the double-bottom candlestick pattern on the daily chart. The daily relative strength index stays in the upward trajectory and remains above the mid-point level of 50, whereas the moving average convergence divergence indicator on the daily chart has been rising and is now in the positive territory.

These factors signal that the stock might advance from current levels. Traders can thus initiate fresh long positions in the stock on declines with a stop-loss at ₹170.

On the upside, the nearest resistance is the critical level of ₹200, which coincides with the 61.8 per cent Fibonacci retracement level. Above that level, the stock can rally to ₹207.

Infosys (₹628.7)

The stock of Infosys closed last week on a flat note. Though the price declined mid-week to register an intra-week low of ₹603.5, it recovered on Friday and closed at ₹628.7.

The stock took support of the 21-day moving average at ₹605. However, the recovery was capped by the resistance band between ₹655 and ₹665. The daily relative strength index has been flat for the past three weeks. On the other hand, the moving average convergence divergence indicator on the daily chart is in the bearish zone.

Notably, the trend on the daily chart is biased downwards. Hence, the stock can be approached with a bearish bias as long as the price rules below the resistance band. But ₹605 — the 21-day moving average — can act as a support, and ₹600, a key level.

Considering these factors, traders can initiate fresh short positions with a stop-loss at ₹650 if the stock breaks below ₹600. While ₹585 is the immediate support below ₹600, a fresh breakdown can attract more selling, which can drag the stock below ₹585 with ease. The subsequent support is at ₹550.

RIL (₹1,224)

For the most part of the past week, the stock of Reliance Industries was moderating. But on Friday, the price rallied and closed at ₹1,224, recouping its intra-week loss. Notably, the price sustains above the critical level of ₹1,200, giving it a bullish bias.

Substantiating the upward momentum, the daily relative strength index has been rising along with the price and it stays above the mid-point level of 50. The moving average convergence divergence indicator on the daily chart also exhibits bullish bias as it is tracing an upward trajectory.

Despite these bullish indications, one should be wary of the hurdle between the price levels of ₹1,250 and ₹1,270. The 50-day moving average lies at ₹1,250 and the 61.8 per cent Fibonacci retracement level of the previous downtrend lies at ₹1,270.

Hence, the stock should break out of these levels to extend the uptrend. Considering these factors, traders can go long in the stock with a stop-loss at ₹1,150 if it breaches the resistance of ₹1,270. A breakout of that level can lift the stock to ₹1,300 and ₹1,365.

Tata Steel (₹293.3)

The stock of Tata Steel has been gradually gaining for the past two weeks; it has now crossed above the 21-day moving average. Nevertheless, the price remains below the important level of ₹310 and the trend remains sideways with boundaries at ₹250 and ₹310. Notably, the 23.6 per cent Fibonacci retracement level is at ₹310.

The daily relative strength index has inched up but remains below the mid-point level of 50. The moving average convergence divergence indicator is signalling a positive bias. But unless it breaches either of the limits of the range, the next leg of trend cannot be confirmed.

Since the stock continues to consolidate, traders can hold back fresh positions. A breakout of ₹310 can potentially lift the price to ₹325 and ₹345, the 38.2 per cent Fibonacci retracement level; whereas, if the stock slips below ₹250, it might fall to ₹240 and ₹225.

Despite consolidation phase, traders with a high risk appetite can buy the stock with a tight stop-loss as it has breached the minor resistance at ₹292.