Technical Analysis

Weekly Trading Guide

Akhil Nallamuthu | Updated on September 14, 2019

SBI (₹291.7)

After trading within a range, SBI began to head north and gained throughout the week, breaking above the critical resistance at ₹280. In fact, it was the biggest weekly gain for the stock in the past 16 weeks, moving up by 6.5 per cent. The weekly chart of SBI shows a morning star candlestick pattern, indicating a potential reversal in the medium-term trend. The stock has also moved past its 21-day moving average, which also indicates strongbuying interest in the past week. The daily relative strength index has crossed the mid-point level of 50 after nearly two months, and the moving average convergence divergence indicator also points upwards, implying considerable strength in the bullish trend. Assuming that the prevailing bullish sentiment will help the stock go up further, breaking a resistance at ₹292 will help the stock move towards the ₹300 levels and beyond in the medium term. But if the stock witnesses profit-booking or reacts to the resistance and slides lower, it might decline to ₹288 levels, below which the support is at ₹280.



ITC (₹239.9)

ITC continues to be held within the ₹240-247 limits. After testing the upper limit of the range at ₹247 — where the 21-day moving average level too coincides — failed to break above and corrected from that level towards the lower limit of the range at ₹240. Most of the decline was during the last two trading sessions, when the stock lost 1.6 per cent. The daily relative strength index and moving average convergence divergence indicator remains flat, implying a lack of trend. Hence, unless the stock breaks either of the limits of the consolidation range, it is better to stay away from initiating new positions. If the weakness in the latter part of the previous week pulls down the price of the scrip further and it goes below ₹240, the immediate support lies at ₹236. If the stock declines below ₹236, the sell-off could intensify and the price might tumble to ₹224 levels. Alternatively, a bounce from the current level will result in the stock inching up towards ₹247 in the upcoming week, beyond which it will face a resistance in the band between ₹250 and ₹252 levels.



Infosys (₹829.3)

The stock of Infosys could not continue its uptrend. The stock corrected in the past week when the price dropped to a low of ₹810.85, after opening the week a bit lower at ₹836.80 against ₹840.15 — its previous week close. The stock was supported by 38.2 per cent Fibonacci retracement level of the previous bullish swing at ₹814. And, on Friday, the stock recovered some of its losses as it opened the session at ₹818.65 and closed higher at ₹829.3 levels. The scrip still trades above 21-day moving average, thereby not posing any immediate threat to the prevailing bullish trend. The relative strength index continue to feature in bullish zone. Hence, if the stock regains the momentum and goes up, it will most likely appreciate towards a lifetime high at ₹847 and even to ₹875 levels in medium term. On the other hand, if the stock is weighed down by factors such as profit-booking or a stronger rupee, it is most likely to drift towards the support band between ₹800 and ₹804 — the 50 per cent Fibonacci retracement level of previous swing in the coming week.



RIL (₹1225.6)

Reliance Industries continues to trade within a tight range — between ₹1,200 and ₹1,240. The upside for the stock is blocked by the 21-day and 50-day moving averages, essentially lying in the same price area, near the ₹1,240 levels. A prolonged consolidation might reduce the significance of both the moving averages, unless the stock moves out of the band. . The relative strength index and moving average convergence divergence indicator plotted on the daily chart of the stock stay direction-less, failing to provide any clue about the upcoming trend. So, until the stock breaks out of the tight price range within which it is oscillating, it might prove costly to make any directional bets. In case the stock moves up buoyed by the positive sentiment in the equity benchmarks and breaches ₹1,240, it is very likely that the price will appreciate to ₹1,300 levels, thereby moving past both the moving average, which may also push RSI above 50. However, if the stock breaks the lower boundary of the range, immediate support is at ₹1,180 and ₹1,140 thereafter.


Tata Steel (₹367.35)

Tata Steel edged up last week and closed with a weekly gain of 3.4 per cent. Thus, the share price of the steel major has posted gains for the second consecutive week. The stock has moved beyond the 21-day moving average, as it witnessed some buying interest in the past two weeks. On Friday, the scrip, after opening at ₹367.05, closed the day at ₹367.35 — the 38 per cent Fibonacci retracement level of the previous downtrend. Though the stock made a high of ₹379.5 on Thursday, it could not hold on, declining and closing the session at ₹365.05, witnessing some selling pressure. Daily candle on Thursday is a shooting star pattern, meaning there are chances for reversal in the trend. The relative strength index too is nearing the mid-point of 50, and a decisive break above that level may help the stock appreciate further towards ₹395 levels. On the other hand, if the stock price depreciates from the current levels, it will most probably retest ₹350 — the 21-day moving average — below which it could tumble to ₹330 levels.


Published on September 14, 2019

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