Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on February 05, 2018 Published on February 04, 2018

ITC: The rounding pattern on the chart keeps the overall bullish outlook intact.

 

SBI (₹296.9)

 

SBI fell sharply, breaking below the key ₹310-₹305 support zone. The stock tumbled over 5 per cent last week. Short-term outlook is bearish. Immediate support is at ₹294 — the 200-day moving average. If the stock sustains above this support, an intermediate bounce to ₹300 or ₹305 is possible. 

But a rally beyond ₹305 is unlikely as fresh selling interest will emerge at higher levels. SBI will remain vulnerable to break below ₹294. Such a break will drag SBI lower to ₹285 or even ₹280.  A relief rally from ₹285 or ₹280 targeting ₹295 or ₹300 cannot be ruled out.

 

     

 

Inability to break above ₹300 and a downward reversal again will leave the possibility high of the stock falling below ₹280 subsequently. A strong break below ₹280 will increase the likelihood of the stock tumbling to ₹265 or even ₹250 over the medium term. High-risk appetite traders can go short on rallies at ₹300 and ₹305. Stop-loss can be placed at ₹319 for the target of ₹280. Revise the stop-loss lower to ₹295 as soon as the stock moves down to ₹290.

 

ITC (₹275.3)

ITC was volatile, spiked to a high of ₹290.15 on Thursday and fell sharply giving back all the gains made and closed 2 per cent lower last week. The rounding pattern on the chart keeps the overall bullish outlook intact. But the stock may witness a slight fall in the short term. Resistance is at ₹285 which can cap the upside in the short term.

As long as the stock stays below this resistance, a fall to ₹265 or even to ₹260 is possible. Cluster of supports are poised in the band between ₹265 and ₹260 and a strong trend-line support is at ₹257 which can limit the downside. A fall below ₹257 is unlikely as fresh and strong buying interest is likely to emerge between ₹260 and ₹265. ITC can trade sideways between ₹257 and ₹285 for a few weeks. Within this range, the bias will remain bullish. An eventual break above ₹285 will then boost the momentum for the next targets of ₹290 and and ₹300. Investors can hold the long positions and accumulate at ₹265 and ₹260. Retain the stop-loss at ₹220.

Infosys (₹1,141.7)

As expected, Infosys witnessed a fall last week. The stock was down 2.5 per cent. The uptrend that has been in place since September 2017 is now ripe for a corrective fall. Resistance is in the ₹1,160-1,165 range. Support is at 

₹1,115 — the 21-day moving average.

Given the weakness in the broader market, Infosys is likely to remain under pressure below ₹1,165 in the short term. While below ₹1,165, the possibility is high of the stock breaking below ₹1,115. This can drag Infosys lower to ₹1,100 and ₹1,080. Further fall below ₹1,080 looks less probable at the moment. But the price action around ₹1,080 will need a close watch. If Infosys breaks below ₹1,080, the corrective fall can extend to ₹1,050 or even ₹1,030. However, such a fall will increase the likelihood of fresh buyers coming into the market. It will also be a good opportunity for existing investors in the stock to accumulate longs positions. Long-term investors can hold the long positions. Medium-term investors who have bought at ₹1,130 can accumulate at ₹1,100.

RIL (₹905.7)

RIL failed to sustain above ₹960 and tumbled 6 per cent last week. This sharp fall indicates that the breakout above the key resistance level of ₹960 in the previous week is a false break. The stock now hovers above a crucial ₹900-₹885 support region. Whether RIL manages to sustain above this support or not will be key in deciding the next trend. A bounce from the ₹900-₹885 support zone will ease the downside pressure and trigger an upmove to ₹960.

But if RIL breaks below ₹885 decisively, it can come under renewed selling pressure. Such a break will drag the stock lower to ₹845 or even to ₹830 on the back of profit booking. Since the stock has been moving in a broad sideways range for a prolonged period of time since October last year, the downmove after breaking below ₹885 could be sharp and swift. High-risk appetite traders can make use of rallies to go short at ₹930 and at ₹945. Stop-loss can be placed at ₹965 for the target of ₹855. Revise the stop-loss lower to ₹905 as soon as the stock moves down to ₹880.

Tata Steel (₹669.7)

Three weeks of narrow sideways move in Tata Steel came to an end last week. The stock broke the range below ₹712 and slumped 8.6 per cent in the past week. A double top reversal pattern on the daily chart has turned the short-term outlook to bearish for the stock. Immediate support is in the band between ₹660 and ₹665, which is likely to be tested in the near term.

 

A bounce from this support region can trigger a relief rally towards ₹700 and ₹710. But further break above ₹710 is less likely.  A downward reversal from the ₹700-₹710 resistance region can take the stock lower to ₹660 again. An eventual break below ₹660 will drag Tata Steel lower to ₹640. Further fall below ₹640 looks unlikely at the moment. Investors can hold the long positions and move the stop-loss to ₹630. But short-term traders can make use of rallies to go short at ₹700 and ₹710. Stop-loss can be placed at ₹730 for the target of ₹650. Revise the stop-loss lower to ₹685 as soon as the stock moves down to ₹655.

Published on February 04, 2018

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