Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on March 31, 2019 Published on March 31, 2019

SBI (320.8)

The uptrend in SBI is gaining momentum. The stock surged 7.6 per cent last week, breaking above the key resistance level of ₹305. Resistance is near current levels at around ₹321. A pull-back from that can trigger a corrective fall to ₹315. A break below ₹315 can drag the stock lower to ₹305. However, the bias continues to remain positive. So, a further fall below ₹305 looks less probable. A bounce from ₹305 will have the potential to take the stock above ₹321. In such a scenario, a rally to ₹350 is likely. The indicators on the charts are positive. The 21-day moving average has crossed over the 55-, 100- and 200-day moving averages. This is a strong bullish sign, indicating that the downside could be limited and the uptrend is likely to remain in place. Short-term traders can wait for dips and go long at ₹315 and accumulate at ₹308. Stop-loss can be placed at ₹295 for the target of ₹350. Revise the stop-loss to ₹325 as soon as the stock moves up to ₹335.

ITC (296.7)

ITC was volatile last week. The stock fell initially to a low of ₹291.2 and bounced back to make a high of ₹302.95. However, it fell in the final trading session of the week, giving back all the gains and closed on a flat note. The resistance at ₹302 is holding well. ITC has to make a decisive close above this hurdle to regain strength and move higher. The next target is ₹309. The level of ₹309 is a key long-term trend resistance. Inability to rise past this level can trigger a corrective fall to ₹302 or ₹300. But a strong break above ₹309 will increase the likelihood of the rally extending to ₹320 and ₹322 over the medium term. On the other hand, if ITC continues to trade below ₹302, a dip to ₹293 or ₹290 is possible. Investors can continue to hold the long positions taken at ₹282, ₹278 and ₹272 with a revised stop-loss at ₹289. Move the stop-loss further higher to ₹301 as soon as the stock moves up to ₹305. Book profits at ₹310.

Infosys (₹742.3)

Infosys tumbled 3 per cent intraweek and made a low of ₹719.6. However, the stock reversed sharply higher recovering all the loss. The bias remains positive on the chart. The 21-day moving average at ₹726 is a key support. The quick bounce from ₹719 indicates that the stock is getting fresh buyers below ₹726. So as long as the stock trades above the 21-day moving average support, there is a strong likelihood of it moving higher to ₹750-₹755. A further break above ₹755 will then increase the likelihood of the uptrend extending to ₹780. The short-term outlook will turn negative only if Infosys makes a decisive close below the 21-day moving average. A fall to ₹705 or ₹700 is possible. A further fall below ₹700 looks less probable at the moment. Medium-term traders can hold the long positions taken at ₹725, ₹720 and ₹715. Retain the stop-loss at ₹680 for the target of ₹790. Revise the stop-loss to ₹735 as the stock moves up to ₹755.

RIL (₹1,363)

RIL opened the week with a gap-down and fell to a low of ₹1,317.15. However, the negative sentiment was short-lived and RIL clawed back, recovering all the loss and closed 1.5 per cent higher for the week. The support at ₹1,316 mentioned last week has held very well. This leaves the bullish outlook intact. A near-term resistance is at ₹1,385, which is likely to be tested in the coming days. Inability to breach this hurdle can drag the stock lower to ₹1,350 initially. A further break below ₹1,350 will then increase the likelihood of the downmove extending to ₹1,315 or ₹1,310. But, if RIL manages to break above ₹1,385, it can gain fresh strength. In such a scenario, RIL can surge to ₹1,400. A strong break above ₹1,400 will be very bullish from a long-term perspective. This will pave way for ₹1,450 and ₹1,500 over the long term. The outlook for the stock will turn negative only if RIL declines below ₹1,300. Such a break can trigger a corrective fall to ₹1,260 and ₹1,250.

Tata Steel (₹520.8)

Tata Steel continued to consolidate for the fourth consecutive week. The stock has been stuck between ₹505 and ₹532. A breakout on either side of ₹505 or ₹532 will decide the next move. If Tata Steel breaks the range below ₹505, it can fall to ₹495 or ₹490. But such a fall looks less likely as the price action on the chart leaves the possibility high of the stock breaking above ₹532. The stock is well above the 21-week moving average level of ₹507. As long as it trades above this support, the bias will remain positive. A strong break above ₹532 will take Tata Steel to ₹540. A further break above ₹540 will then increase the likelihood of the stock targeting ₹560 over the medium term. Traders can hold the long positions taken at ₹518 and ₹512. Retain the stop-loss at ₹487 for the target of ₹555. Revise the stop-loss to ₹515 on a rally to ₹525.

The writer is Chief Research Analyst at Kshitij Consultancy Services

Published on March 31, 2019

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