Technical Analysis

Weekly trading guide - High Five stocks

Akhil Nallamuthu | Updated on September 09, 2019 Published on September 07, 2019

MSCI Asia-Pacific index up 1 per cent. File Photo   -  Reuters

SBI (₹273.9)


SBI was largely trading flat through the week within the ₹268 and ₹275 range. The biggest rally was on Wednesday, when the stock appreciated from ₹268 to ₹275.4. However, it continues to trade below the critical level of ₹280 — its 20-day moving average — unable to reverse the bearish trend. That said, the stock has not fallen below the key support level at ₹263, implying that bears might be losing steam.




In fact, the stock has formed a higher low at ₹268. However, the relative strength index (RSI) is flat, indicating indecisiveness. Hence, until the stock stays between the range of ₹263 and ₹280, it can be under a prolonged period of consolidation. If the bears get exhausted, the price may bounce towards ₹280 and even ₹292 over the medium term. Alternatively, a break below ₹263 can pull down the stock price to ₹257 levels. In that case, it can pave way for a further decline towards ₹250, an important psychological level.

ITC (₹243.9)


ITC was trading in a tight range between ₹240.6 and ₹246.9 throughout last week. Though it traded above the important level of ₹246 briefly, the rally could not sustain and the stock fell back to the same trading range. The 20-day moving average is at ₹246.1, making it a crucial resistance level. So, unless the stock closes above ₹246 level, it will remain sluggish. Above ₹246, the stock faces an immediate resistance at ₹250 — a psychological resistance.



The 23 per cent Fibonacci retracement level of the previous downtrend is at ₹252 and this, along with ₹250, will act as a strong resistance zone. Rally beyond these levels, the stock has the potential to even appreciate to ₹260 levels in a short period of time. On the other hand, if the stock breaks below ₹240, which is a significant support, it may decline to the critical support band between ₹236 and ₹238. If these levels fail to hold the fall, the stock can tumble to ₹224 levels.

Infosys (₹840.1)


Infosys had a muted opening after the extended holiday, but it resumed its strong uptrend thereafter. After breaking out of a consolidation range, the stock picked up momentum and moved to its all-time high of ₹847 on Friday. A weak rupee also helped the stock to gain. But the stock cooled off a little and closed the week at ₹840.15. The relative strength index has just crossed above the 70-mark where the over-bought territory kicks in. However, there is still room left for appreciation and the moving average convergence-divergence indicator points to a strong uptrend as well.



Hence, the bullish momentum is likely to sustain and the stock can move towards ₹875 levels, as indicated by Fibonacci extension. If the stock manages to breach that level, it can face resistance at around ₹900. If the stock falls further on back of profit-booking, it may fall to ₹826, where the 23 per cent Fibonacci retracement level will provide support. Further correction from that level may drag the stock towards ₹800 levels.

RIL (₹1,222.5)


After consolidating between ₹1,226 and ₹1,304 over the past few weeks, Reliance Industries broke below the lower boundary of the consolidation range on Tuesday. It closed below the 20-day moving average, indicating a short-term bearish bias. Also, the relative strength index has gone below 50. This, along with the weakness in the moving average convergence-divergence oscillator, accentuated the weakness.



On Friday, the stock gained 1.83 per cent, bouncing from the psychological support of ₹1,200, and attempted to recoup some of its losses. However, it could not move beyond the resistance at ₹1,226. The stock can be expected to stay within the ₹1,200-1226 range; a breakout in either direction should decide the next leg of the trend. If the price breaks below ₹1,200, the stock will find immediate support at ₹1,180; below that, ₹1,140 will act as a key support. If the stock appreciates and moves above ₹1,226, it might retest the previous high at ₹1,304, the upper boundary of the consolidation range.

Tata Steel (₹355.4)


Tata Steel gained 3.4 per cent on Friday and closed at ₹357, breaking out of the ₹330 and ₹350 range that had been holding the stock for the past two weeks. In fact, the stock closed with a weekly gain after nine weeks of decline, and there are signs of trend reversal visible in the morning star candlestick pattern formed in the weekly chart.



A close above the level of ₹350 also means the price has moved above the 20-day moving average, implying that the short-term trend of the stock may be turning bullish; a bullish divergence in the relative strength index too confirms it. The stock can face a hurdle at ₹367.6, where the 23 per cent Fibonacci retracement level of the previous downtrend lies. Above that level, the stock has the potential to appreciate towards ₹395 levels in the medium term. On the other hand, if the stock declines, it will find an immediate support at the level of ₹350. If the stock breaks below ₹350, it can fall to the bottom of the earlier sideways trend, which is at ₹330.

Published on September 07, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.