Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on June 30, 2019 Published on June 30, 2019

SBI (₹360.9)



SBI surged over 3 per cent last week. It is poised near a crucial resistance level of ₹362. An inability to breach this hurdle can drag the stock lower to ₹352-350. A further break below ₹350 will increase the likelihood of the stock extending its fall to ₹340-335. In such a scenario, SBI can remain range-bound between ₹335 and ₹362 for some time. But such a strong down-move from the current levels looks less likely at the moment as the charts reflect strength in the stock. Also, the momentum of surge over the past couple of weeks leaves the possibility high of the stock breaking above ₹362 in the coming days. As such, the downside could be limited to ₹350 — a key long-term resistance-turned-support level — even if the stock dips from the current levels in the near term. Fresh buyers are likely to emerge at lower levels near ₹350 and limit the downside. An eventual break and a decisive close above ₹362 will boost the momentum. Such a break can take SBI higher to ₹390 and ₹400 in the coming weeks.

ITC (₹273.95)



ITC surged 2 per cent initially last week, but failed to sustain higher. The stock made a high of ₹279.95 and reversed lower sharply, giving back all the gains. Though the support at ₹272.5 is holding well , the bias remains negative. The price action keeps the possibility high of the stock declining below ₹272.5 in the coming days. Such a break will trigger fresh selling pressure and increase the likelihood of the stock tumbling towards ₹265 and ₹260 in the coming weeks. As mentioned last week, the levels of ₹262 (200-week moving average) and ₹257 (55-month moving average) are crucial long-term supports for ITC, which can halt the fall. As such, the stock can find a bottom between ₹262 and ₹257 if it declines below ₹272.5. A strong upward reversal from the ₹262-257 support zone will signal the beginning of a fresh leg of long-term up-trend. On the other hand, if ITC sustains above ₹272.5, it can rise to ₹279 once again. In such a scenario, the stock can remain range-bound between ₹272.5 and ₹282 for some time.

Infosys (₹731.95)



Contrary to expectations, Infosys fell last week. The stock was down 2.5 per cent . The resistance at ₹759 has held well and pulled the stock lower. The resistance will now be in the ₹743-745 zone. The 21-day moving average resistance is also poised in this zone which makes the ₹743-745 region a strong resistance. Infosys has to surpass ₹745 to move past ₹755 and ₹759. But, as long as the stock trades below ₹745, the near-term outlook will be negative, and a fall to ₹720 and ₹717 is possible. A break below ₹717 will increase the likelihood of the stock extending its fall to ₹710 and ₹705. The region around ₹700 is a strong support. A cluster of trend lines and the 55-week moving average supports are poised around ₹700. As such, a further fall below ₹700 looks unlikely at the moment. An upward reversal from around ₹700 will see the stock moving higher towards ₹730 and ₹750 levels again. Such a move will also keep the broader ₹695-775 sideways range intact.

RIL (₹1,252)



RIL initially rose about 2 per cent, but failed to sustain higher. The stock reversed sharply lower from a high of ₹1,304.5, giving back all the gains, and closed 2.1 per cent lower. The support-turned-resistance level of ₹1,300 capped the upside. The bearish view remains intact. RIL can test the near-term support level of ₹1,240 in the coming days. A bounce from this support can trigger a corrective rally to ₹1,300. A range-bound move between ₹1,240 and ₹1,300 can be seen for some time. But if RIL declines below ₹1,240, it will then increase the likelihood of the fall extending to ₹1,220 and ₹1,200. The region between ₹1,220 and ₹1,200 is a strong long-term support where a cluster of trend lines and the 55-week moving average are poised. A further fall below ₹1,200 is less probable at the moment. Fresh buyers are likely to emerge around ₹1,200 and limit the downside. A strong bounce from ₹1,200 may indicate the beginning of a fresh leg of a long-term uptrend.

Tata Steel (₹504.4)



Tata Steel continues to trade volatile between its support at ₹460 and resistance at ₹520. It has been stuck in this ₹460-520 sideways range over the last several weeks. Within this range, the stock is currently moving higher towards ₹520. An inability to breach ₹520 will keep the sideways range intact and drag the stock lower to ₹500 and ₹490. A break below ₹490 can take it further lower to 460. A breakout on either side of ₹460 or ₹520 is needed to decide the next trend . A strong break above 520 will see Tata Steel rallying towards ₹550 and ₹560. On the other hand, if it breaks the range below ₹460, it will come under renewed pressure. Such a break will mean that the long-term downtrend that has been in place since 2018 is still intact. In such a scenario, Tata Steel will be in a danger of tumbling towards ₹400 and even lower levels over the medium term.

The writer is Chief Research Analyst at Kshitij Consultancy Services


Published on June 30, 2019

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