Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on January 21, 2018

Immediate outlook is unclear for SBI

SBI (₹309)

SBI was volatile last week. It fell as expected, initially to a low of ₹292.65 but reversed higher from there. This bounce-back move faced resistance near ₹318 — the 55-day moving average and fell back again. The immediate outlook is unclear. Key resistance is inbetween ₹320 and ₹325 and support is inbetween ₹290 and ₹285. A broad range-bound move between ₹285 and ₹325 is possible for some time. A breakout on either side of ₹285 or ₹325 will then decide the next trend. If SBI manages to breach ₹325 decisively, the downside pressure will ease. It will also mark the end of the corrective fall that has been in place since last November. In such a scenario, SBI will gear up for a fresh rally to ₹350 levels thereafter. On the other hand, if the stock remains below ₹325 in the coming days and breaks below ₹285, it will come under renewed pressure. Such a break will take the stock lower to ₹260 on the back of profit booking. Traders can stay out of the market until a clear trend emerges.

Outlook is bullish for ITC

ITC ( ₹273.8)

ITC fell initially in the past week. However, the support at ₹260 held well and halted the down move as expected. Support is at ₹270, which is likely to limit the downside in the near term. A rise to ₹280-₹281 is likely in the coming week. A strong break above ₹281 can take the stock higher to ₹283 and ₹285. On the other hand, if ITC reverses lower from ₹281, a corrective fall to ₹270 is possible. Cluster of supports are poised inbetween ₹270 and ₹260. A fall below ₹260 looks unlikely now. Also, the rounding pattern on the weekly chart suggests that the downtrend that has been in place since July last year is coming to an end. So, as long as the stock sustains above ₹250, the possibility of it breaking above ₹300 and revisiting ₹350 levels cannot be ruled out in the coming months. Short-term traders can hold the long positions with the revised stop-loss at ₹270 for the target of ₹280. Investors with a long-term perspective can go long at current levels. Accumulate on dips at ₹265 and ₹260 with a stop-loss at ₹220.

Infosys gains momentum

Infosys (₹1,143.2)

Infosys moved up for the second consecutive week and surged 6 per cent breaking above the key resistance level of ₹1,120. The uptrend in the stock is gaining momentum with the strong 13 per cent rallyover the last two weeks. Immediate resistance is at ₹1,170. A strong break above it can take the stock higher to ₹1,200 — a key psychological resistance level. Since the stock has been rising sharply in a very short span of time, a corrective fall from ₹1,200 towards ₹1,135 or ₹1,100 cannot be ruled out. On the other hand, if Infosys remains below ₹1,170 , it can dip to ₹1,120 in the near-term. A break below ₹1,120 will increase the likelihood of the stock moving further lower towards ₹1,090 or even ₹1,070. Such a fall in the stock will attract fresh buyers coming into the market and limit the downside. Long-term investors can hold the long positions. Medium-term investors who do not have any position in the stock can buy on dips at ₹1,130 and accumulate at ₹1,085.

Resistance caps the upside in RIL

RIL ( ₹929.3)

The resistance at ₹960 continues to cap the upside in RIL. The stock has been struggling to breach this hurdle since October last year. RIL touched a high of ₹959.55 and has come-off sharply from there to close 1.8 per cent lower for the week. Immediate support is at ₹910, which is holding as of now. If the stock sustains above this support, a revisit to ₹960 is possible. However, only a strong break above ₹960 will bring fresh bullish momentum in the stock and pave way for ₹1,000 and higher levels thereafter. On the other hand, if RIL fails to gain momentum and reverses lower again in the coming days, it can break below the intermediate support level of ₹910 and fall to the crucial ₹880-₹875 support zone. A strong bounce-back from this support will keep RIL inside the ₹885-₹960 sideways range for some more time. But a strong break below ₹885 can leave the stock under pressure. Such a break will increase the likelihood of the stock tumbling to ₹800 on the back of profit booking.

Tata Steel can fall in the near term

Tata Steel (₹771)

Tata Steel began the week on a strong note but failed to retain the momentum. The stock touched a high of ₹792 and fell sharply by 5 per cent. Key resistance is at ₹785, which is restricting the stock from further rally. A strong break and a decisive close above ₹785 is needed for the stock to gain fresh momentum. Such a break can take the stock higher to ₹800 initially. Further break above ₹800 will pave way for the next target of ₹850. On the other hand, if the stock remains below ₹785 in the coming days, there is a strong likelihood of it falling further towards ₹735 or ₹730 initially. A break below ₹730 can drag it to ₹715 or ₹710 thereafter. The region between ₹715 and ₹700 is a key support for the stock. The stock will come under pressure if it falls below ₹700. Such a fall can trigger profit booking and can drag Tata Steel lower to ₹650. Investors can hold the long positions with a stop-loss at ₹640. Revise the stop-loss higher to ₹680 as soon as the stock moves up to ₹800.

Published on January 21, 2018

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