Technical Analysis

Weekly trading guide

Akhil Nallamuthu | Updated on September 29, 2019

SBI (₹281.2)



SBI opened the week strongly at ₹307.5 against the previous close of ₹301.7, up nearly 2 per cent. The stock appreciated further to a high of ₹316, briefly trading above the 50-day moving average. However, the stock reversed abruptly as it could not sustain the bullish momentum and the price began to decline, breaking below the key supports at ₹300 and ₹292.

Thus, the near-term outlook seems weak as rallies are sold-off. The relative strength index has dipped below the 50-mark, indicating weakness. On the downside, supports are at ₹273.7 and ₹267. Resistances are at ₹292 and ₹300. The next leg of trend can be expected only if the stock price breaks either to ₹300 or ₹267.

In case it goes above ₹300, the stock will face a hurdle at the resistance band between ₹305.1 and ₹307.6, beyond which it may potentially retest the ₹316 levels. But if the stock breaks below ₹267, the sell-off could intensify and the stock will most likely tumble to ₹260. The return last week was minus 6.2 per cent.

ITC (₹252.9)



The stock price of ITC took a huge leap as it opened the week at ₹250 against the previous close of ₹238.05, which is a solid 5 per cent gain. It extended the rally and went on to make a high of ₹260.5. However, the stock could not move beyond that level and the price started to soften and slumped to ₹242.7, from where it bounced off from the 21-day moving average support.

Studying the chart, one can observe that the stock is consolidating sideways as the price oscillates in the band between ₹247 and the resistance band ₹258-260. If the stock manages to breach the upper limit of the range at ₹260, it is likely that it will appreciate towards ₹270 levels, beyond which there’s an immediate resistance at ₹273.

However, if the stock weakens and slides below the lower limit of the range, that is, ₹247, the price may depreciate to ₹240, below which it can even drop to ₹234 levels. Last week’s return was plus 6.5 per cent.

Infosys (₹782.3)



Infosys witnessed considerable selling immediately after the previous week opened. As a result, it tumbled below the key level at ₹800. A stronger rupee weighed down the stock. The fall extended to ₹741.9 before the stock recouped some if its losses, closing the week at ₹782.

Recoveries are strongly resisted by the price band between ₹793 and ₹800. Hence, the near-term outlook remains weak. It has also moved below the 50-day moving average, potentially shifting the medium-term trend to bearish. The RSI has dipped below the 50 midpoint and the moving average convergence divergence indicator too appears weak. So, if the scrip weakens below ₹781, it will most likely depreciate to ₹762.

A break below that level can intensify the bearish trend and the stock could dwindle to ₹725 levels. Alternatively, if the stock manages to post a recovery beyond the stiff resistance at ₹800, there will be a minor resistance at ₹814, beyond which it might move northwards to ₹850 levels over the medium term.

RIL (₹1,308.7)



Following the bullish momentum, the stock price of Reliance Industries continued to gain throughout last week. The stock toppled the key resistance at ₹1,300, making the case stronger for further appreciation. The relative strength index is clearly favouring the bulls and the moving average convergence divergence indicator has come into the positive territory, denoting a strong prevailing uptrend.

Also, the stock price has broken above the falling trend-line resistance. The stock has posted gains for two consecutive weeks. All these imply that the stock is on a strong bull trend and is likely to continue appreciating in the coming sessions.

On the upside, the stock will face a minor resistance at ₹1,320, beyond which it could strengthen to ₹1,365 levels in the near term. On the other hand, if the stock undergoes a correction, ₹1,300 will act as a key immeidate support, below which the price could fall to ₹1,240 in the short term. The return last week was plus 4.4 per cent.

Tata Steel (₹359.5)



The share price of Tata Steel was consolidating last week, fluctuating between ₹360 and ₹380. Though the stock attempted to move past ₹380, it failed, as it was rejected by the 50-day moving average. Thus, the broader ₹345-380 range continues to control the trend.

The moving average convergence divergence indicator implies weakness and so is the relative strength index. But since the RSI remains in over-sold conditions, the chances of a major downtrend from the current levels stand reduced. But unless the stock invalidates the range, the direction of the next major trend will be indecisive. Hence, the near-term outlook seems sluggish.

If the stock breaks out of the upper boundary of the range, it may rise towards the resistance band between ₹395 and ₹400. Beyond those levels, it can move upwards to ₹440. But, if the stock breaches below ₹345, the support is at ₹330, below which the stock could test the psychological level of ₹300.

Published on September 28, 2019

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