Technical Analysis

Weekly trading guide

Akhil Nallamuthu | Updated on November 10, 2019 Published on November 10, 2019

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SBI (₹316)

After a strong rally in October, the stock of SBI seems to be consolidating in the band between ₹315 and ₹324 since the beginning of this month. The stock oscillated in this tight range during the past week and more importantly, it managed to stay above an important level at ₹315. The 61.8 per cent Fibonacci retracement level of the previous downtrend coincides at ₹324.

As long as the stock holds above ₹315, the near-term bullish trend is not under threat and the outlook remains positive. However, a prolonged consolidation should be dealt with caution as it could trigger some profit-booking. The daily relative strength index and the moving average convergence divergence continue to suggest an uptrend.

If bulls regain traction in the coming days and the price breaks out of ₹324 level, the stock can appreciate to ₹335. The resistance above that level is at ₹350. On the other hand, if the stock weakens from the current level and breaches the support at ₹315, it will find an immediate support at ₹309 and subsequently at ₹300.

ITC (₹260.5)

The stock of ITC had a subdued opening last week. But on Thursday, it closed at ₹265.85, above the strong resistance at ₹263 after multiple attempts. The close marked a higher high and confirmed a cup-and-handle pattern in the daily chart, a bullish signal. But the stock declined from that level and closed the week at ₹260.5, above an important support at ₹260.

Both the daily relative strength index and the moving average convergence divergence indicator hint that the bullish trend will continue. Also, the 21-day moving average continues to stay above the 50-day moving average, keeping the short-term outlook positive. Considering that the stock takes support from the current level and resumes its upward movement, it will face resistance at ₹269. Above that level, the resistance is at ₹274.

Do note that according to the cup-and-handle pattern, the stock has the potential to rise to ₹291 in the coming days. But if the stock undergoes a correction, there is a support ₹258. A break below that level could drag it to ₹252.

Infosys (₹708.1)

The stock of Infosys continued its recovery last week and glided past the resistance at ₹700, shifting the momentum in its favour. A weekly close at ₹708.1 would mean that it has broken above the 38.2 per cent Fibonacci retracement level of the prior downtrend, in addition to breaching the psychological level of ₹700.

Notably, the stock closed in the green for a second consecutive week, indicating that the recovery might continue to lift the price. Since making a low of ₹615.5 recently, the stock has returned a considerable 15 per cent. A close above ₹700 increases the chance for a sustainable recovery.

It is corroborated by a rising daily relative strength index. The moving average convergence divergence indicator, too, has entered the positive territory, showing some strength in bulls. Thus, the stock seems to have gotten past the negative sentiment and moved upwards with the first hurdle at ₹745.

Beyond that, the resistance is at ₹760. On the other hand, if rallies are sold into and the stock falls below ₹700, it could depreciate to ₹665, below which the support is at ₹620.

RIL (₹1,445.5)

After witnessing a positive close for several weeks, the stock price of Reliance Industries moderated in the past week. The stock declined through the week but recouped some of its losses on Thursday. Thus, it seems to have formed a tight range between ₹1,432 and ₹1,470.

Even though the price witnessed a minor correction from its peak of ₹1,489.65, it continues to trade above the 21-DMA, the near-term bias is bullish. In fact, unless the stock falls below ₹1,400, the medium-term will be bullish. But certain hints indicating a possible loss in upward momentum cannot be neglected.

The daily RSI looks wobbly and the moving average convergence divergence indicator has entered the negative territory. So, on the back of these indications, if the price correction extends, the stock will have a support at ₹1,400. Below that level, there is a possibility that the medium-term trend will turn bearish, inviting more bears.

Such a scenario will drag it down to ₹1,360. Alternatively, the price will retest the all-time high, beyond which a resistance lies at ₹1,528.

Tata Steel (₹397.9)

The stock of Tata Steel began the week on a positive note and broke above the key level of ₹400. After trading above that level briefly, it started to weaken as it witnessed a hindrance at ₹418.

The same price level is where the 50 per cent Fibonacci retracement level of the previous down-swing lies. Though the stock closed below the crucial level of ₹400, the fall was arrested by a reasonable support at ₹395. The daily relative strength index and the moving average convergence divergence indicator is biased on the upside. Also, the 21-day moving average is above the 50-day moving average, indicating a positive bias.

So, the bullish sentiment can be expected to stay, resulting in a bounce from the current levels, until ₹395 holds valid. On the upside, ₹418 is a considerable resistance and if the stock manages to pierce through that level, it will most likely appreciate to ₹440 over the medium term.

On the other hand, if the stock price depreciates further, it could decline to the support at ₹380. Next support is at ₹360.

Published on November 10, 2019
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