Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on March 09, 2018 Published on July 23, 2017


SBI can dip before moving higher (₹290.3)

SBI was range-bound last week. The overall outlook is positive. But an intermediate dip to ₹287 or ₹284 cannot be ruled out before the up-move resumes. However, a break below ₹284 looks less probable. A subsequent upward reversal can see a bounce back move to ₹290 and ₹294 once again. Such a move will form an inverted head and shoulder reversal pattern on the chart. The neckline resistance will be at ₹294. A break above it will confirm this pattern and can take the stock higher to ₹301. The stock will gain fresh momentum on a strong break and a decisive close above ₹301. The stock can then target ₹310 and ₹315. Such an upmove will also increase the likelihood of the stock targeting the long-term resistance level of ₹327. Traders who have taken long positions last week can hold them. Accumulate longs on dips at ₹285. Retain the stop-loss at ₹277 for the target of ₹320. Revise the stop-loss higher to ₹282 as soon as the stock moves up to ₹305. The near-term outlook will turn negative if SBI breaks below ₹284. Such a break can drag the stock lower to ₹275 or ₹273.

ITC warrants a close watch (₹288.5)

ITC plummeted 14 per cent last week. The wide gap-down opening on Tuesday following the GST Council’s move to increase the cess on cigarattes has completely changed the structure on the charts. The price action in the coming days will need a close watch for a a clear idea to emerge on the next move. If ITC manages to sustain above the intermediate support is at ₹284, a bounce to ₹295 or ₹300 is possible in the short term. The region between ₹295 and ₹300 is a key resistance. The stock will have to break above this resistance zone decisively to ease the downside pressure. Such a break can take ITC higher to ₹308 and ₹313. But as long as the stock stays below ₹300, it can continue to remain under pressure and decline below the support at ₹284. A strong break below ₹284 can bring fresh selling pressure in the stock. Such a break can drag the stock lower to ₹270 in the coming weeks. Inability to bounce back from ₹270 and a subsequent break below it will increase the likelihood of the stock extending its down-move to ₹262-₹257 which is a significant medium-term support zone.

Infosys to remain range-bound (₹979.9)

Infosys was range-bound and volatile between ₹968 and ₹1,007 in the past week. This range-bound movement islikely to continue in the near term. A breakout on either side of ₹968 or ₹1,007 will determine the next move. If the stock declines below ₹968 it can fall to ₹957. Further break below ₹957 will increase the likelihood of the down-move extending to ₹935 or even ₹925. On the other hand, if the stock manages to sustain above ₹968, it will increase the possibility of it breaking above ₹1,007 eventually. Such a break can take the stock higher to ₹1,035 and ₹1,045. Inability to break above ₹1,045 and a downward reversal from there will keep the broader ₹900-₹1,045 sideways range intact. Infosys has been stuck inside this broad range since last November. But if it manages to breach and close decisively on a weekly basis above ₹1,045, a sharp and swift move to ₹1,090 or ₹1,100 is possible. It will also signal the end of the prolonged sideways consolidation and the reversal of the downtrend that has been in place since June 2016. Investors can hold the long positions.

Key resistance ahead for RIL (₹1,586.2)

After a narrow range-bound move for most part of the week, RIL surged on Friday to close over 3 per cent higher for the week. The company, announcing a 1:1 bonus issue and a free 4G phone in its AGM on Friday, triggered this sharp rise. Further rise breaking above the psychological barrier at ₹1,600 to ₹1,630 or ₹1,640 is likely in the short term. However, a key medium-term trend resistance is poised in the ₹1,635-₹1,640 zone. Since the stock has surged sharply in a very short span of time, the ₹1,635-₹1,640 resistance zone is more likely to halt the current rally. A pull-back from this resistance region may trigger a corrective fall to ₹1,550 or ₹1,530. The downside in stock is limited to ₹1,500. A fall below ₹1,500 is unlikely as every dip will find fresh buyers entering the stock. Investors can hold the long positions. Revise the stop-loss higher to ₹1,425. Book partial profits at ₹1,620 and move the stop-loss on the rest of the holdings to ₹1,460 thereafter. If RIL manages to break and close decisively above the ₹1,640 level this month, it will be well set to target ₹1,850 in the coming months.

Downside can be limited in Tata Steel (₹552.6)

Tata Steel failed to break the resistance at ₹573 and reversed lower after making a high of ₹572 last week. Immediate support is at ₹547. A break below it can take the stock lower to ₹540. Further fall below ₹540 is less likely. But if the stock breaks below ₹540, it can decline to ₹530 or ₹528. Having said that, an upward reversal from ₹540 can take the stock higher to ₹555. Further break above ₹555 will see the up-move extending to ₹575 and ₹580. A significant long-term resistance is at ₹580. Whether Tata Steel breaks above this hurdle or not will determine the next trend. If it manages to break and close decisively above ₹580, the possibility of it targeting ₹650 and ₹700 levels thereafter will increase. Investors can hold the long positions and retain the stop-loss at ₹495. The stop-loss can be revised higher to ₹515 as soon as the stock moves up to ₹575. The outlook will turn negative only if the stock falls below ₹528. But the region between ₹530 and ₹528 is a key long-term resistance-turned support zone and the possibility of the stock falling below it is unlikely.

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Published on July 23, 2017
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