Technical Analysis

Weekly Trading Guide

GURUMURTHY K | Updated on March 09, 2018 Published on September 17, 2017

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Resistance caps the upside in SBI (₹272)

The 21-day moving average halted the bounce-back move in the past week. SBI marked a high of ₹276.5 and has come off from there to close the week on a flat note. The crucial support level of ₹268 is likely to be tested this week. If SBI manages to sustain above this support, a bounce to ₹275 or ₹277 is possible. But, the pull-back last week from ₹276 leaves the bias negative. It also increases the possibility of the stock breaking below the crucial support level of ₹268. Such a break can drag SBI lower to ₹251, which is the 38.2 per cent Fibonacci retracement support or ₹245. Short-term traders can go short on a decisive break below ₹268. Stop-loss can be placed at ₹273 for the target of ₹255. Revise the stop-loss lower to ₹265 as soon as the stock moves down to ₹261. Cluster of supports are seen around ₹245 and an immediate break below it is less probable. An upward reversal from this support will ease the downside pressure. A bounce-back move to ₹260 or ₹265 is possible in such a scenario.



ITC likely to fall further (₹269.3)

ITC fell after touching a high of ₹278. It is just above a key support level of ₹269. The bias is bearish on the chart. There is an inverted cup and handle pattern formation on the daily chart. This will now serve as a continuation pattern indicating that the downtrend is still intact. This increases the possibility of the stock breaking below ₹269. Such a break can take the stock lower to ₹262-₹260 — a key long-term support level in the coming days. As being reiterated, the ₹262-₹260 region is a key long-term support which is likely to halt the current downtrend. An upward reversal from this support zone will keep the long-term uptrend, which has been in place since March 2016, intact. A bounce to ₹270 is possible in such a scenario. If ITC manages to rise past ₹270 thereafter, it will signal a trend reversal and also the beginning of a fresh leg of upmove, which may have the potential to take the stock further higher. Investors with a long-term perspective can start buying the stock at ₹263 and accumulate at ₹260.



Short-term resistance is ahead for Infosys (₹908.6)

Infosys bounced back sharply last week after marking a low of ₹874. A key short-term resistance is ahead at ₹919, which is likely to be tested this week. The next move depends on whether Infosys breaks above this hurdle. A strong break above ₹919 will ease the downside pressure. A rise to ₹950 is possible then. Further break above ₹950 can take Infosys to ₹975. It will also increase the likelihood of the stock revisiting ₹1,000 levels. But, if the stock reverses lower from ₹919, it can fall below ₹900 again. In such a scenario, the stock can fall to ₹878 initially. A break below ₹878 will drag it to ₹866 — the first key long-term support level. A further break below it can drag Infosys lower to ₹840 and ₹830 — the next significant multi-year long-term trend line and 100-month moving average support level, respectively. A break below ₹840-₹830 support zone is unlikely. A strong upward reversal will keep the long-term uptrend intact and will have the potential to take the stock higher to ₹950 or higher levels. Investors can hold the long positions.



RIL reverses lower from a key resistance (₹843.4)

RIL surged over 3 per cent last week. It tested the resistance at ₹861 and has come off from there, giving up some of the gains made during the week. Inability to bounce above ₹850 this week may keep it under pressure. Support is at ₹833, which is likely to be tested in the initial part of this week. A bounce from there can take RIL higher to ₹865 or ₹867 — a key trend resistance. If the stock manages to surpass this hurdle, it can move higher to ₹900. Since the stock has been on a strong and continuous surge, a pull-back move on the back of profit-booking cannot be ruled out after testing ₹900. Such a pull-back move can take the stock lower to ₹850 and ₹830 thereafter. On the other hand, if RIL breaks below ₹833 in the coming days, it can decline further. A corrective fall to ₹810 or ₹800 is likely in such a scenario. A further break below ₹800 will increase the likelihood of the fall extending to ₹785 or even ₹770 thereafter. Inability to bounce from ₹770 will see the fall extending to ₹740 or ₹735 levels.

Long-term resistance ahead for Tata Steel (₹679.3)

Tata Steel surged over 5 per cent intra-week to record a high of ₹692. The stock, however, has come off from this high, giving up some of the gains to close 3.6 per cent higher for the week. The stock has been moving higher consistently and has closed in the green for the seventh consecutive week. Immediate resistance is at ₹685. A strong break above this hurdle can take it higher to ₹700 or ₹710. The region between ₹700 and ₹710 is a key long-term support zone. Since the stock has been on a continuous rally, the ₹700-₹710 zone is more likely to halt the current rally. A downward reversal on the back of profit booking from this hurdle cannot be ruled out. Such a pull-back move can take Tata Steel to ₹670, ₹650 or even lower. Investors can hold the long positions with the revised stop-loss at ₹640. Move the stop-loss higher to ₹660 as soon as the stock moves up to ₹698. Watch the price action at ₹700 and exit the long positions if it declines below ₹690 after testing the ₹700-₹710 resistance zone.



Published on September 17, 2017

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