Technical Analysis

Weekly Trading Guide

Akhil Nallamuthu | Updated on October 20, 2019 Published on October 20, 2019

SBI moves beyond key resistances (₹269.6)

After a subdued opening, the stock of SBI rallied in the end of last week and broke out of the range between ₹246 and ₹262. The price is testing the 21-day moving average which falls at around ₹270. The daily relative strength index indicates a bullish divergence and the moving average convergence divergence indicator, too, shows an uptick.

The short-term outlook of the stock is bullish, which could lead it higher to ₹275 level, a resistance that coincides with the 23.6 per cent Fibonacci retracement level of the previous bear trend.

Above that level, the medium-term trend of the stock will turn bullish and attract more buyers, which could lift the price to ₹290 in the coming sessions.

Above that ₹300 — a psychological level — is the next hurdle. On the other hand, if stock cannot hold on to the bullish momentum and the price corrects, the supports will be at ₹262 and ₹267. The stock posted a weekly gain of nearly 6 per cent.

ITC holds within a tight range (₹246.5)

The stock price of ITC traded sluggish the past week trading in a tight range between ₹243 and ₹247. After a significant fall in the preceding week, the stock could not post a recovery and was resisted strongly at ₹247. Since the major trend is bearish, the stock will have difficulty breaking out of that level.

The daily relative strength index and the moving average convergence divergence indicator is flat and do not indicate any bias. The price of ₹247 is also coincides with the 50-day moving average, and the 21-day moving average lies at ₹249, making the price area between ₹247 and ₹249 a significant resistance zone.

Since the stock has formed a good base at ₹243, it is not recommended to approach the stock with a negative bias. If the price breaches either ₹243 or ₹249. A breakout will result in the stock moving towards ₹253, whereas a break-down will result in the stock declining to the previous low of ₹234. The stock posted a weekly gain of 1 per cent.

Infosys tumbles but finds support (₹767.8)

After breaking out of the range between ₹780 and ₹800 on the upside, Infosys opened the week significantly lower. But further decline in the price was arrested by a support at ₹760, coincided by the 61.8 per cent Fibonacci retracement level of the previous uptrend. Importantly, the 21-day moving average has gone below the 50-day moving average, suggesting the possibility of the medium-term trend becoming bearish.

A significant weakness is observed in the moving average convergence divergence indicator. One can also observe a head- and-shoulders pattern in the daily chart, which is an indication of trend reversal. A close below ₹760 on a daily basis will confirm the pattern and result in the stock tumbling to ₹673, as projected by the pattern. Noticeably, the stock has a support at ₹725.

On the other hand, if the stock takes support at ₹760 and moves up, it will face a hurdles at ₹780 and at ₹800. The stock posted a weekly loss of 5.8 per cent.

RIL registers an all-time high (₹1,416.3)

The stock of Reliance Industries had a muted start as it traded flat during the first half. In the latter half, the stock resumed its stellar rally and marked a new life-time high of ₹1,427.9 on Friday. With a close at ₹1,416.3, it has breached the ₹1,400 mark and could potentially trigger the next leg of uptrend in the coming days.

The daily relative strength index has entered the over-bought territory, but the price action looks steady. The moving average convergence divergence indicator suggests considerable upward momentum. The medium-term trend of the stock is strongly bullish, and it can be bought on dips. On the upside, the stock has the potential to climb to ₹1,485, beyond which it will face a resistance at ₹1,500.

However, if the stock is subject to a correction on the back of profit-booking, ₹1,400 will offer a strong support. On further correction, a less likely scenario, the stock will find support at ₹1,365. The stock posted a weekly gain of 4.7 per cent.

Tata Steel stages a recovery (₹359.6)

The stock price of Tata steel rose last week after taking support at ₹340 levels. However, it stopped short of breaking the resistance at ₹360. But the price has closed above the 21- and 50-day moving averages, thereby raising the possibility of further ascent.

The daily relative strength index has crossed the midpoint level of 50 and one can also spot a bullish divergence, making the case stronger for the bulls. The moving average convergence divergence is also showing an uptick.

The current closing level is a resistance, and if the stock manages to break out and appreciate as a result of buying interest, it could advance to ₹380 in the coming days, beyond which it will face a hindrance in the form of a resistance band between ₹395 and ₹400. Alternatively, if the stock obeys the resistance at ₹360 and declines, it will decline to ₹345, below which the support is at ₹330. The stock posted a weekly return of about 6 per cent.

Published on October 20, 2019
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