Technical Analysis

Weekly Trading Guide

BL Research Bureau | Updated on August 05, 2019 Published on August 03, 2019

Resistances can cap the upside in SBI

SBI (₹308.45)

SBI plummeted 10 per cent last week. The sharp fall has dragged it well below the key support level of ₹328 (21-week moving average). The outlook is bearish. Immediate support is at ₹306 (200-day moving average). If SBI manages to sustain above this support this week, a corrective rally to ₹320 is possible. A break above ₹320 will see the upmove extending to ₹330. But a rise beyond ₹330 is unlikely as fresh selling is likely to emerge at higher levels and limit the upside. SBI is likely to resume its downtrend either from ₹320 or ₹330. Such a move will take the stock initially lower to ₹300 and ₹290. An eventual break below ₹290 will see the stock targeting ₹280 and ₹275. The region between ₹280 and ₹275 is a significant medium-term support which may halt the current fall. A bounce from there can take SBI higher to ₹300 and ₹320 again. But a break below ₹275 will increase the downside pressure. Such a break will increase the likelihood of the stock tumbling towards ₹250-245.

ITC hovers above a key support

ITC (₹264.6)

ITC was down 2 per cent last week. The 21-day moving average resistance at ₹271 continues to cap the upside. Immediate support is near the current levels at ₹263.5 (200-week moving average). If ITC manages to sustain above this support, a rally to ₹270-272 is possible. In such a scenario, the stock can remain range-bound between ₹263 and ₹272. ITC has to surpass ₹272 decisively to ease the downside pressure and see a relief rally to ₹275 or ₹278 in the near term. But such an upmove looks less likely as the bias continues to remain negative. As such, ITC is likely to break below ₹263 and fall initially to ₹257. A further break below ₹257 will increase the likelihood of the fall extending to ₹245 — a strong long-term support level. A fall below ₹245 looks less probable. A strong bounce from ₹245 may take the stock higher to ₹300 levels from a long-term perspective. Hence a fall to ₹245 will be a good opportunity for investors to buy the stock.

Near-term outlook is unclear for Infosys

Infosys (₹775.4)

Infosys declined below the key support level of ₹780 last week. The stock was down 1.5 per cent for the week. The near-term outlook continues to remain unclear. Infosys has been struggling to breach the psychological level of ₹800 over the last few weeks. A decisive close above ₹800 is needed for it to gain fresh bullish momentum. On the downside, key supports are at ₹765 and ₹755. Infosys can remain broadly sideways between ₹755 and ₹800 for some time. A breakout on either side of ₹755 or ₹800 will give a clear indication on the next direction of move. A strong break above ₹800 is needed to bring back the bullish sentiment. Such a break can trigger a fresh rally to ₹850 and ₹870 thereafter. On the other hand, if Infosys breaks the range below ₹755, it can come under renewed pressure. In such a scenario, the stock can initially test ₹740 on the downside. A further break below ₹740 will then increase the likelihood of the downmove extending to ₹715 or even ₹700.

RIL confirms trend reversal

RIL (₹1,184.2)

RIL extended its fall breaking below the psychological level of ₹1,200 last week. The stock tumbled over 5 per cent intra-week but managed to recover some of its loss and closed 2.5 per cent lower for the week. The sharp fall last week confirms the trend reversal. Cluster of resistances are poised between ₹1,220 and ₹1,250. These can cap the upside if RIL rises past ₹1,200 in the coming days. Fresh sellers are likely to come in, around the ₹1,220-1,250 region and drag the stock lower again. The outlook is bearish. RIL can test ₹1,130 on the downside. A bounce from ₹1,130 can take it up to ₹1,200 again. But a break below ₹1,130 will increase the likelihood of the fall extending to ₹1,100 in the coming weeks. A complex head and shoulder reversal pattern on the chart leaves the possibility high for the stock to test ₹1,050 on the downside, over the medium term. The price action in the coming weeks will need a close watch to gauge whether the current fall can halt around ₹1,100 or extend towards ₹1,050.

Tata Steel (₹409)

Downtrend is intact in Tata Steel

Tata Steel tumbled 8 per cent last week. The stock is heading towards ₹400 as expected, but the pace of fall has been much faster than anticipated. The downtrend is getting intensified. Next significant support is at ₹390, which can be tested in the near term. If Tata Steel manages to bounce back from this support, a relief rally to ₹430 or even ₹445 is possible. But a rise beyond ₹445 is unlikely as fresh sellers are likely to emerge at higher levels and cap the upside. In such a scenario, Tata Steel can remain range-bound between ₹390 and ₹445. However, the downtrend is likely to remain intact. An eventual break below ₹390 will see the stock resuming its downtrend towards ₹360. From a long-term perspective the current downtrend, which had begun in 2018, may have the potential to drag Tata Steel lower to ₹250-230.

Published on August 03, 2019
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