Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on June 15, 2019 Published on June 15, 2019

SBI (343.8)

SBI was stuck in a narrow range between ₹339 and ₹349 last week. The near-term outlook is mixed. SBI can trade sideways between the significant support at ₹335 and resistance at ₹350 for some time. Within this range, there is a strong likelihood of the stock falling to ₹335 — the lower end of the range in the early part of this week. A breakout on either side of ₹335 or ₹350 will decide the direction of the next move. A break below ₹335 can take SBI lower to ₹325 and ₹320. As being reiterated over the last couple of weeks, the region around ₹320 is a strong long-term resistance-turned-support, which can limit the downside. Fresh buyers are likely to emerge around this level. As such, a fall to ₹325-₹320 will be a good buying opportunity from a medium-term perspective. On the other hand, if SBI breaks above ₹350, it can move up to the next crucial resistance level of ₹362. SBI has to rise past ₹362 decisively to gain fresh bullish momentum. Targets above ₹362 are ₹390 and ₹400.

ITC (₹277.9)

ITC has been managing to sustain above the crucial long-term support level of ₹275. However, the stock is not gaining strength for a strong rally. This indicates lack of fresh buying interest in the stock. ITC has to break above ₹282 to get a breather. Such a break can take it up towards ₹287 and ₹290. Only a strong rise past ₹290 will confirm the trend reversal, which will then pave way for the next targets of ₹300 and ₹310. But such a strong upmove looks unlikely at the moment. The 21-day moving average has crossed below the 200-day moving average and is now on the verge of crossing below the 100-day moving average. This is a negative signal, indicating that the upside could be limited. It also keeps the possibilities open of the stock breaking below `275. As such, if ITC breaks below ₹275, the downside pressure will increase. In such a scenario, the current downtrend will remain intact and the stock can extend the fall to ₹265 and ₹260 thereafter.

Infosys (₹740.4)

Infosys moved up last week as expected, but failed to sustain higher. The stock made a high of ₹758.9 and reversed sharply lower, giving back almost all the gains. The resistance at ₹755 has held well. Key near-term supports are at ₹734 (21-week moving average) and ₹730 (21-day moving average), which are likely to limit the downside. A break and fall below ₹730 looks less probable now. As long as the stock trades above ₹730, the outlook will remain positive. An upward reversal from the ₹734-₹730 support zone can take the stock higher to ₹755 again. An eventual break above ₹755 will then take Infosys up to ₹770 and ₹775 — the upper end of the ₹695-₹775 sideways range. The stock has been stuck in this broad sideways range since mid-January this year. If it manages to rise past ₹775, it can gain fresh momentum and target ₹790 and ₹800. But a pull-back from ₹775 will keep the sideways range intact. In such a scenario, Infosys can fall-back initially to ₹760-₹750 and even lower thereafter.

RIL (1,316.95)

RIL managed to sustain above ₹1,300 but is not gaining strength to move higher. The price action over the last few weeks increases the possibility of the stock declining below ₹1,300. Inability to rise past ₹1,338 (55-day moving average) and a subsequent fall last week, strengthens the case for a fall below ₹1,300. RIL will come under renewed pressure on a break below ₹1,300 and can move lower to ₹1,280-1,275. This move could be sharp and swift. A further break below 1,275 will then increase the likelihood of the stock extending its fall to 1,250 and even 1,220 over the medium term. On the other hand, if RIL manages to sustain above 1,300, a bounce to 1,338 is possible again. A break above 1,338 will then increase the possibility of the upmove extending to 1,350 and 1,360. The region between 1,360 and 1,365 is a crucial resistance. RIL has to rise past 1,365 to gain fresh momentum and target 1,400 and 1,430. But such a strong upmove looks unlikely at the moment.

Tata Steel (₹501.4)

Contrary to our expectation of a fall, Tata Steel surged last week. The stock was up 4 per cent. Support for the stock is in the ₹490-488 region. As long as the stock trades above this support zone, the near-term outlook will remain positive. A rise to ₹515-520 is likely. The region around 520 is a crucial long-term trend resistance. As such, Tata Steel has to rise past ₹520 decisively to turn the outlook bullish and also to signal a trend reversal. Such a break can take the stock higher to ₹527-530. A further break above ₹530 will then increase the likelihood of the stock extending its upmove to ₹560 over the medium term. Inability to breach ₹520 can trigger a pull-back move to ₹500 and ₹490. A break below ₹490 will then increase the likelihood of the stock extending its fall to ₹460. In such a scenario, Tata Steel can trade in a sideways range between ₹460 and ₹520.

(The writer is a Chief Research Analyst at Kshitij Consultancy Services)

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Published on June 15, 2019
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