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

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