Technical Analysis

Weekly trading guide: Tata Steel likely to trend up

Akhil Nallamuthu | Updated on July 05, 2020 Published on July 05, 2020

SBI (₹184.7)

The stock of SBI ended last week on a flat note. Though it faced downward pressure in the first half of the week, it took support at ₹178 and recovered, ending the week at ₹184.7. The scrip has now closed flat for two consecutive weeks, indicating a lack of trend.

From the current level, the nearest support and resistance levels are at ₹178 and ₹192 — the 23.6 per cent Fibonacci retracement level of the prior downtrend; until either of these levels are breached, the next leg of trend will remain uncertain.

As the stock has been flat, the daily relative strength index, though above the midpoint level of 50, stays flat. Also, the moving average convergence divergence indicator in the daily chart, despite being in the positive zone, has been flat for the past two weeks. Considering these factors, traders can remain on the fence until either ₹178 or ₹192 is breached.

Above ₹192, the stock can go up to ₹200, which is a crucial level, as a breakout of this level can turn the medium-term trend bullish. A break below ₹178 can drag it to ₹170.

ITC (₹207.5)

The stock of ITC rallied last week and closed at ₹207.5, registering a positive weekly close for the second straight week. Also, it is the first weekly close above the resistance at ₹200 — the 61.8 per cent Fibonacci retracement level of the previous downswing — in five months.

This, along with a higher base in the daily chart, indicate a considerable upward momentum, paving the way for further strengthening. Also, the stock lies well above the 21-day moving average at ₹194, keeping the bull trend intact. Corroborating the bullish view, the daily relative strength index is showing a fresh uptick and lies above the midpoint level of 50.

The moving average convergence divergence indicator in the daily chart is hinting at a fresh upward momentum. Hence, one can maintain a bullish view until the stock remains above the 21-day moving average. Traders can buy the stock on declines with a stop-loss at ₹194.

On the upside, the stock is likely to rally to ₹212, a breakout of which can take the stock to ₹218. The resistance above that level can be spotted at ₹230.

Infosys (₹762.7)

The stock of Infosys started the past week on the back foot as it opened with a gap down. It then moved in a narrow range in the first half of the week. However, towards the end of the week, the bulls regained their mojo and the stock rallied above its previous high.

As a result, it registered a fresh three-month high of ₹765.4 on Thursday, before ending the week at ₹762.7. The daily relative strength index is rising along with the stock and is well above the midpoint level of 50. The moving average convergence divergence indicator in the daily chart is in the positive territory and is showing a fresh upward momentum.

These factors show that the stock remains bullish and is likely to rally further in the upcoming trading sessions. Hence, traders can initiate fresh long positions with a stop-loss at ₹725. On the upside, the scrip could face resistance in the band between ₹800 and ₹815.

Above these levels, the stock will most likely retest its 52-week high at ₹847, a breakout of which can lead to a quick rally to ₹900.

RIL (₹1,787.9)

Bulls were back in action last week, taking the stock of RIL higher, after a sluggish movement in the preceding week. The stock bounced back after taking support at ₹1,700 and broke out of the resistance at ₹1,750 on Thursday, implying that it continues to form higher lows in the daily chart, which is a bullish indication.

The 21-day moving average lies at ₹1,668 and until the price remains above that level, the stock can remain bullish. Also, the price action in the weekly chart hints at further extension of the rally. The daily relative strength index is showing a fresh uptick and is well above the midpoint level of 50.

The moving average convergence divergence indicator in the daily chart, though remains in the positive territory, has been flat in the past week. However, this is not necessarily a bearish signal. Since the price action is indicating a strong bullish momentum, traders can consider taking fresh long positions on dips with a stop-loss at ₹1,700.

On the upside, the stock will most likely advance to ₹1,860, above which it could rise to ₹1,900.

Tata Steel (₹329.9)

The stock of Tata Steel has ended flat for a third consecutive week as it continues to consolidate. However, it manages to stay well above the crucial support of ₹300 and has also inched above the minor resistance of ₹325.

Also, a support is forming in the ₹300-310 band. The 23.6 per cent Fibonacci retracement level of the previous bear trend lies within this range, making the price area a strong base for the stock. Hence, until the price remains above these levels, the odds are in favour of an uptrend. This is substantiated by the fact that both the relative strength index and the moving average convergence divergence indicator, despite being flat in the daily chart, lie in bullish territory.

Also, the price is above the 21-day moving average and the price action in the daily chart shows that the stock has formed a higher base. Considering these factors, traders can initiate fresh long positions on declines. The stop-loss can be at ₹300.

From the current levels, the stock might appreciate towards the resistances at ₹340 and ₹350.

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Published on July 05, 2020
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