Bellwethers. Weekly trading guide: Tata Steel stays above key base

SBI (₹189.2)

After declining in September, the stock had been trying to recoup its loss since early October. However, it faced a roadblock at around ₹206 and started to decline last week.

Consequently, it has fallen below the 21- and 50-day moving averages, and the price action is indicating a bearish bias. The stock, which lost nearly 7 per cent, registered an intra-week low of ₹185.9, before closing at ₹189.2. Technical indicators, too, show considerable weakness in the stock.

The daily relative strength index has been falling, and slipped below the midpoint level of 50, whereas the moving average convergence divergence indicator on the daily chart is on the verge of entering the bearish zone. So, the above factors give a negative outlook for the stock. But noticeably, it has a support at ₹186.

Hence, traders can stay on the fence and initiate fresh short positions if the stock decisively breaches the support of ₹186. The stop-loss can be placed at ₹200. The nearest support below ₹186 is at ₹176. The subsequent support is at ₹168.

ITC (₹165.2)

The stock of ITC depreciated throughout last week and slipped below the crucial support of ₹165. However, after trading below that level briefly, it recovered towards the end of the week and closed just above that level.

But the overall trend is bearish, and the stock is inching downwards, forming fresh lows. The downtrend, which has been in place since mid-August, seems to be intact and the likelihood of a further fall is high. The trend can turn positive only if the price rallies past the crucial level of ₹175.

Until then, the stock will be inclined to downtrend. Substantiating the downward bias, the daily relative strength index remains below the midpoint level of 50. The moving average convergence divergence stays in the bearish territory. Hence, traders can initiate fresh short positions on rallies with a stop-loss at ₹175.

The stock will most likely breach ₹165 and decline to ₹157 in the near term. A break below this level can drag the stock towards the support at ₹146. On the upside, the resistance above ₹175 is at ₹181.

Infosys (₹1,060.6)

The stock, which has been on a strong uptrend since March, showed signs of weakness during the week before last week. Following this, the stock weakened and broke below an important support of ₹1,100 last Tuesday and wrapped up the week at ₹1,060.6.

This has opened the door for further decline. So, in the short term, the stock could trade with a bearish bias. Corroborating the negative outlook, the moving average convergence divergence indicator on the daily chart has turned the trajectory downward and it shows considerable downward momentum and the daily relative strength index has been declining in tandem with the price.

So, traders can initiate fresh short positions on rallies with a stop-loss at ₹1,100. From the current level, ₹1,025 is the immediate support. At this level liesthe 61.8 per cent Fibonacci retracement level, making it a significant base.

Below that level is the psychological level of ₹1,000. On the upside, ₹1,100-1,115 can be a resistance band.

RIL (₹2,054.5)

Extending the decline, the stock of Reliance Industries fell last week and breached the important support of ₹2,070 and closed at ₹2,054.5, after making a low of ₹1,991. Though the recent trend has been bullish, the recovery towards the end of the week has given some hope for the bulls. Moreover, the major trend is still upside.

Nevertheless, a decisive break below ₹2,000 can turn the trend bearish. Supportive of the negative bias, the daily relative strength index is pointing downwards and the moving average convergence divergence indicator on the daily chart has entered the bearish zone.

Also, the 21-day moving average has dipped below the 50-day moving average. But since ₹2,000 is a key base, fresh short positions can wait. Initiate a fresh sell position if only the stock drops below ₹2,000. The stop-loss can be placed at ₹2,100.

Immediately below ₹2,000 is the support of ₹1,940. Below that level, the support lies at ₹1,800. At the other end, the resistance above ₹2,070 can be spotted at ₹2,170.

Tata Steel (₹410.5)

After facing a considerable decline in September, the stock of Tata Steel has been on a recovery since the beginning of October. As a result, the stock has moved above the 21-day moving average and has been forming higher highs and higher lows.

However, last week, the stock moderated from its recent high of ₹426, but closed above an important support of ₹400, retaining the positive bias. Indicators, too, move in favour of the bulls. That is, the daily relative strength index is showing a fresh uptick following a recovery and remains above the midpoint level of 50.

The moving average convergence divergence indicator has been tracing an upward trajectory and stays in the bullish zone. The stock can be inclined to uptrend until the price stays above the support of ₹400.

Given the prevailing price action, the stock is likely to rally from here and so, traders can be bullish and buy the stock on declines with a stop-loss at ₹380. The scrip can possibly rally towards ₹425 and then to ₹436.

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