Technical Analysis

Weekly Trading Guide

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

Infosys to test a key resistance

The upmove in Infosys is gaining momentum. The stock rose for the second consecutive week and closed 2.2 per cent higher in the past week. Immediate support is at ₹1,016. As long as the stock stays above this support, a rise to test the crucial resistance region of ₹1,030-₹1,035 is likely in the coming days. Whether Infosys breaks above ₹1,035 will be key in determining the next move.

Inability to break above ₹1,035 and a subsequent pull-back move can take the stock lower to ₹1,015, ₹1,000 or even ₹990 thereafter. In such a scenario, the broad ₹900-₹1,035 sideways range may remain intact. But if the stock breaks and closes decisively above ₹1,035, it will be the first sign indicating that the downtrend that has been in place since June 2016 has ended. The stock can then test ₹1,050 initially. A break above ₹1,050 can take it higher to ₹1,070. A fresh rally to ₹1,070 will confirm the trend reversal. In that case Infosys will all be set to target ₹1,200 and ₹1,250 levels again over the medium term. Investors can hold the long positions.

Near-term outlook is positive for ITC

ITC failed to sustain higher after opening the week with a gap-up and making a high of ₹267.4 last Monday. Though the stock reversed downwards to touch a low of ₹257.6 on Wednesday, it managed to claw back and close 1.2 per cent higher for the week. The 21-day moving average support at ₹258 halted the fall last week. The near-term outlook is positive. Immediate resistance at ₹269 – the 100-day moving average – is likely to be tested in the near term. A strong break and a decisive close above this hurdle can take ITC higher to ₹272 and ₹276 thereafter. Such an upmove will also give an initial sign that the downtrend that has been in place since July has ended. A decisive weekly close above ₹276 will confirm the same. On the other hand, if the stock fails to break above ₹269 in the coming days and reverses lower, it can fall to ₹264 initially. Further break below ₹264 will increase the likelihood of the pull-back move extending to ₹261 thereafter. The region between ₹261 and ₹259 is a key support zone which is likely to limit the downside.

Immediate outlook is unclear for RIL

RIL was stuck in a narrow range between ₹908 and ₹933 in the past week. The stock has been moving in a sideways range since the beginning of the month and is seeking direction. This leaves the immediate outlook unclear. Support is at ₹900 and resistance is at ₹940. A breakout on either side of these levels will decide the next movement leg for the stock. If it sustains above ₹900 and breaches ₹940 in the coming days, an upmove to ₹960 is possible. But if RIL breaks below ₹900 in the coming days, it can fall to ₹885 or ₹878 initially.

The level of ₹878 is a crucial short-term support. If RIL manages to bounce from there, a bounce-back move to ₹900 or ₹930 is possible thereafter. But if the stock breaks decisively below ₹878, it can come under more selling pressure. It will then increase the likelihood of the stock falling to ₹860 or even ₹845 thereafter.

Such a fall will confirm a double-top reversal pattern on the charts and will leave the stock in danger of tumbling to ₹800, or even lower, thereafter.

SBI is stuck in a sideways range

SBI was stuck inside a sideways range between ₹309 and ₹321 for the second consecutive week. The immediate outlook continues to remain unclear and there is no change in our view from last week. A breakout on either side of ₹309 or ₹321 will decide the next trend. If the stock manages to sustain above ₹309 and gains momentum to breach ₹321, the downside pressure can ease. Such a break can take it to ₹323 — the 21-day moving average resistance or ₹325 initially. Further break above ₹325 will increase the likelihood of the upmove extending to ₹335 or even ₹340 thereafter.

On the other hand, if SBI declines decisively below ₹309, it will come under more selling pressure. In such a scenario, there is a strong likelihood of the stock falling to ₹300 or ₹297 on the back of profit booking. Further break below ₹297 can drag the stock to ₹290 thereafter. Traders can hold the short positions taken at ₹315. Retain the stop-loss at ₹322 for the target of ₹292. Revise the stop-loss lower to ₹310 as soon as the stock moves down to ₹305.

Tata Steel can resume its uptrend

Tata Steel fell initially in the past week. However, the stock managed to bounce back after making a low of ₹671 on Thursday and recovering most of the loss made during the week. The price action since November reflects a flag formation on the charts. This is a bullish continuation pattern. It indicates that the current uptrend is still intact and is likely to resume in the coming weeks. A strong break and a decisive weekly close above ₹715 will confirm the pattern. Such a break will increase the likelihood of the stock rallying to test the crucial ₹740-₹750 resistance region. An eventual break above ₹750 will pave the way for the next targets of ₹850 and ₹900 over the long term. Investors with a medium-term perspective can go long at current levels. Accumulate longs on dips at ₹685 and ₹670. Keep the stop-loss at ₹585. The 21-week moving average at ₹667 and a trendline around ₹645 are key supports for the stock. The outlook will turn negative only if the stock declines below these supports, which looks less probable at the moment.

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Published on December 17, 2017
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