Technical Analysis

Weekly Trading Guide

Akhil Nallamuthu | Updated on November 04, 2019 Published on November 03, 2019

V Sreenivasa Murthy

 

SBI gains on substantial buying interest (₹313.5)

The stock of SBI climbed throughout the past week, crossing an important level of ₹300; it even registered a 13-week high of ₹317.8 on Thursday. Noticeably, it has moved past ₹309, the 50 per cent Fibonacci retracement level. After closing at ₹313.5, the stock is currently trading at a resistance in the band between ₹309 and ₹315. But the daily relative strength index and the moving average convergence divergence indicator continue to indicate a bullish bias and the medium-term outlook of the stock is positive. So, with the current momentum, the stock will most likely break out of ₹315 and move up towards ₹335. Note that before ₹335, the stock could face a minor resistance at ₹324, the 61.8 per cent Fibonacci retracement level. A daily close above ₹315 will confirm a higher peak, which could reinforce the existing bullish momentum. On the other hand, if the stock undergoes a correction on profit-booking, it has supports at ₹300 and ₹292. The stock has returned an impressive 15.3 per cent for October.

 

 

ITC is testing a key resistance level (₹ 261.3)

The stock of ITC gained during the past week after facing a sell-off in the week before. The stock currently faces strong resistance at ₹263 – also substantiated by the 38.2 per cent Fibonacci retracement level of the previous downtrend. Though the daily chart shows that attempts to break ₹263 for the past three trading sessions have failed, the 21-day moving average has crossed over the 50-day moving average, indicating a shift in the medium-term trend. Also, bullishness is exhibited by the daily relative strength index and the moving average convergence divergence indicator. So, on the back of it, if the stock closes above ₹263 on daily basis, it will confirm a higher peak and will attract fresh buying interest, lifting the stock price further. On the upside, it will face resistances at ₹269 and ₹274. On the contrary, if the stock faces selling pressure, it will find immediate support at ₹258. But a break below that level could drag the stock to ₹250 over the medium term. Despite high volatility, the stock closed flat in October.

 

Infosys attempting to recover after a crash (₹687.9)

The Infosys stock was impacted by negative news and the price tumbled by a record level and even registered an 11-month low of ₹615.1. The 21-DMA has crossed below the 50-DMA; the daily relative strength index and the moving average convergence divergence indicator are pointing downwards making the medium-term outlook weak. However, the stock price recovered over the past week and managed to close at ₹687.9, above the 50 per cent Fibonacci retracement level of ₹638. But only a break above ₹700 can lead to a sustainable recovery. Over the medium term, it is highly probable that the stock will consolidate within a broad range of between ₹620 and ₹700. In case the sentiment shifts in favour of the stock resulting in the breakout of ₹700, it will face hindrances at ₹745 and ₹760. Alternatively, if the price breaches the support at ₹620, it will test the 52-week low at ₹599.8. Below that level, the sell-off could accelerate, potentially pulling down the price to ₹575. The stock plunged 14.9 per cent in October.

 

RIL sailing on good bullish momentum (₹1,456.9)

 

Reliance Industries (RIL) continued its uptrend, hitting record high in the past week. The stock registered a new all-time high of ₹1,489.65 on Thursday and closed with significant gains for the third consecutive month. Though the bulls appear to be in control, there are some concerns which can be observed in the price action. The bearish divergence is visible in the weekly relative strength index (RSI), whereas the daily RSI is hovering in the over-bought territory after seven months. The moving average convergence divergence indicator also shows a bearish divergence in the weekly time-frame. These factors call for caution as the stock might witness a price correction. So, if the stock declines, ₹1,400 will act as a support. A break below that level could drag the stock to ₹1,360. But if the stock continues with the current bullish trend, it is highly likely that it will appreciate to ₹1,500. The stock gave a return of 10 per cent October.

 

Tata Steel puts forth a good recovery (₹399.8)

A recovery in the stock price of Tata Steel accelerated last week as it cracked above a key resistance at ₹380 and closed at ₹399.8, testing the psychological level of ₹400. But the price has already confirmed a higher peak and the 21-day moving average is attempting to cross over the 50-day moving average – a bullish signal. The stock has also moved past the 38.2 per cent Fibonacci retracement level of the previous swing at ₹395, paving the way for further appreciation. The daily relative strength index and the moving average convergence divergence indicator are signalling a substantial bullish momentum. Importantly, the price action has developed a double bottom chart pattern on the daily chart, which already stands confirmed. The stock will face a resistance at ₹418, beyond which it has the potential to move towards ₹440. However, if the price level of ₹400 manages to hinder the gains, it could decline to the supports at ₹380 and ₹360. The stock gained 5.5 per cent in October.

 

 

Published on November 03, 2019
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