Technical Analysis

Weekly Trading Guide

GURUMURTHY K | Updated on January 29, 2018

The near term outlook is unclear for SBI   -  Reuters

Technical outlook for bellwethers SBI, ITC, Infosys, RIL and Tata Steel

SBI (₹313.5)

SBI broke above the key resistance level of ₹325 but failed to sustain higher. The stock made a high of ₹334.8 and fell sharply giving back most of the gains made during the week. The near-term outlook is unclear. Support is in between ₹310 and ₹305. If the stock manages to sustain above this support zone, a bounce to revisit the resistance at ₹325 is possible. Inability to break above ₹325 can keep the stock range-bound between ₹305 and ₹325 for some time. A strong break and a decisive close above ₹325 can boost the momentum. Such a break will increase the likelihood of the stock rallying to ₹345 or ₹350. On the other hand, if SBI declines below ₹305, it can fall to ₹293 or ₹288. The ₹293-₹288 is a crucial short-term support zone for the stock. If SBI breaks below ₹288 decisively, it can come under more selling pressure. Such a break can drag the stock lower to ₹270 or even ₹260 thereafter on the back of profit booking. Traders can stay out of the market.

ITC (₹280.8)

ITC extended its rally for the third consecutive week. The stock surged 2.6 per cent last week and has been up 6.8 per cent over the last three weeks. The rounding pattern that has been forming since September 2017 indicates that the downtrend that has been in place since last July is coming to an end. The strong rally over the last three weeks is giving an initial confirmation that this downtrend is getting reversed. The current rally can continue to test the key resistances at ₹285 and ₹290. But the possibility of this upmove halting at ₹285 or ₹290 cannot be ruled out. Since the stock has been rallying continuously, a corrective fall after testing the ₹285, ₹290 resistances is more likely. A pull back from ₹285 or ₹290 can take it lower to ₹280 or ₹275. But a further fall below ₹275 is unlikely. Any intermediate pull-back is more likely to attract fresh buying. An eventual break above the ₹285-₹290 resistance zone will pave way for a rally to ₹300. Investors can hold the long positions with stop-loss at ₹220.

Infosys (₹1,170.8)

Infosys skyrocketed breaking above the key resistance at ₹1,170 and recorded an intra-week high of ₹1,220. However, it has come-off sharply from this high and has closed 2.4 per cent up for the week. Resistance is at ₹1,190. Inability to breach this hurdle can trigger an intermediate corrective fall in the stock. As long as the stock remains below ₹1,190, a fall to ₹1,150 or ₹1,130 cannot be ruled out. A break below ₹1,130 will increase the likelihood of the stock extending its corrective fall to ₹1,100 or ₹1,090. But, the downside is expected to be limited to the ₹1,100-₹1,090 support zone as any intermediate pull-backs in the stock can attract fresh buyers who have missed the current rally, can come into the market to purchase it. Infosys will gain fresh momentum if it breaks above ₹1,200. Such a break will pave way for the next targets of ₹1,250 and ₹1,300. Long-term investors can hold the stock. Medium-term investors who have taken long positions at ₹1,130 can also retain it and buy at ₹1,100.

RIL (₹964.5)

The resistance at ₹960 which was capping the upside in RIL for a prolonged period of time since October last year was broken in the past week. The stock surged to a high of ₹990, but failed to retain the momentum. It has come-off sharply from the week’s high and has closed at ₹964, up 3.8 per cent for the week. Immediate resistance is at ₹971. Inability to break above this hurdle can keep the stock pressured on the downside. As long as the stock remains below ₹970, it can fall to ₹940 or ₹930. Further break below ₹930 will increase the likelihood of the fall extending to ₹910 or ₹900. The region between ₹910 and ₹900 is a crucial support for the stock. A strong break below ₹900 will indicate a trend reversal. On the other hand, RIL will have to make a strong break and a decisive weekly close to gain strength again. The downside pressure will ease in such a scenario and RIL can rally to test the psychological ₹1,000-mark. Such a break will also increase the possibility of the stock targeting ₹1,025 over the medium term.

Tata Steel (₹769)

Tata Steel is stuck in a sideways range. The stock has been range-bound between ₹742 and ₹792 over the last three weeks. A breakout on either side of ₹742 or ₹792 will determine the next move for the stock. Tata Steel will gain fresh momentum if it breaks above ₹792 decisively. Such a break will see the current uptrend resuming towards ₹800. A strong break ₹800 will see the uptrend extending towards ₹850 thereafter. But, if the stock breaks the current sideways range below ₹742, it can fall to ₹730 initially. Further break below ₹730 will increase the likelihood of the fall extending to ₹715 and ₹700 thereafter. As mentioned last week, the level of ₹700 is a crucial support and the stock will come under pressure if it breaks below it decisively. Such a break below ₹700 will trigger a fall towards ₹650 on the back of profit booking. Investors can hold the long positions. Retain the stop-loss at ₹640 and revise it higher to ₹680 as soon as it moves up to ₹800.

Published on January 28, 2018

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