Technical Analysis

Weekly Trading Guide

Akhil Nallamuthu | Updated on October 13, 2019 Published on October 13, 2019

SBI (₹254.5)

State Bank of India seems to have entered a consolidation phase after declining for two consecutive weeks. The stock has been fluctuating within the ₹246-262 range for the past six trading sessions. Though it attempted to rally, it was capped by the resistance at ₹262. So, unless the stock moves out of the range, the next potential trend will be uncertain. But one should remember that the existing overall trend is bearish and the stock may be vulnerable for further fall. The RSI continues to remain below the midpoint at 50 and the moving average convergence divergence indicator shows weakness. If the bears regain control and the price falls below ₹246, it could decline towards the support band between ₹230 and ₹233, which is a 10 per cent downside from current levels. However, if the stock attempts a recovery and breaks out of the resistance at ₹262, it will face an immediate hurdle at ₹267, beyond which it can appreciate to ₹275 over the medium term.

ITC (₹243.9)

The stock of ITC fell throughout last week after posting gains for the previous two weeks. It met with stiff resistance at ₹263 and faced significant selling pressure at this level. The stock seems to have tilted towards its overall bearish trend, unable to capitalise on the rallies. It has slipped below the support at ₹247, paving the way for further decline. The stock has also fallen below the 21-day and 50-day moving averages, indicating that the bears have taken charge. The relative strength index has dipped below the midpoint level of 50 and the moving average convergence divergence indicator has started showing weakness, adding to woes. The most likely scenario going forward is that the stock price will fall further and retest its previous low at ₹234, a break of which will result in the stock tumbling to ₹223 over the medium term. Alternatively, if the stock gains strength and move up from the current levels, it will face hurdles at ₹247 and ₹253 levels. The stock posted a weekly loss of 5.1 per cent.

Infosys (₹814.8)

The stock of Infosys, since the beginning of the month, has been moving in a sideways range in the band between ₹781 and ₹800. It broke out on Friday and closed the week at ₹814.8, propelling the stock price above the 21- and 50-day moving averages. The stock has formed higher high and higher low in daily time frame chart increasing the possibility of it strengthening further. But it faces a hurdle in the form of a minor resistance at ₹814 level. One can observe an uptick in the relative strength index as it has crossed above the midpoint level at 50; but there is no bullish confirmation yet in the moving average convergence divergence indicator. Above ₹814, the stock can potentially appreciate, retesting its 52-week high of ₹847 and it can even go up further in the coming trading sessions. If the stock falls from the current level, negating the breakout, it will find support at ₹800. Support below that is at ₹781. The stock posted a weekly gain of 2.7 per cent.

RIL (₹1,352.6)

The stock has been on an uptrend since the second half of September. After a minor correction during the past week, Reliance Industries (RIL) took support at around ₹1,300 and moved up. The stock ended the week at ₹1,352 and faces a resistance at ₹1,365. The price action is very bullish and the uptrend can be expected to continue next week. The relative strength index is rising steadily and does not indicate any over-bought levels. The moving average convergence divergence indicator also corroborates the uptrend. On the back of the positive sentiment, the stock will most probably break out of ₹1,365 and can even test its life-time high of ₹1,417.5 in the near term. But there is a slim chance that the stock might witness profit-booking, in which case ₹1,300 will act as a substantial support. A break below that level could result in further fall towards the price band between ₹1,240 and ₹1,230 over the medium term. The stock posted a weekly gain of 3.4 per cent.

Tata Steel (₹339)

The stock of Tata Steel was sluggish over the past week. Noticeably, the stock briefly traded below the key support at ₹330, but it gradually moved up and ended the week at ₹339. Hence, on weekly basis, the support at ₹330 stays valid, providing some hope for the bulls. Observing the daily chart, the relative strength index indicates a bullish divergence, paving the way for a recovery. If the stock price bounces from current levels, it could face an immediate resistance at ₹345. The next hurdle for the bulls lies at ₹360 — the 50-day moving average. But the overall trend remains bearish and the stock could still face selling pressure on rallies. Hence, if it cannot stage a recovery and declines, ₹330 will act as a critical support. Below that, the stock will most likely attract fresh selling and the price could fall to the support of ₹300. The price level of ₹330 is an important support. The stock posted a weekly gain of 1.8 per cent.

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Published on October 13, 2019
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