Technical Analysis

Weekly Trading Guide

Akhil Nallamuthu | Updated on November 17, 2019 Published on November 17, 2019

SBI (₹321.9)

After seeing a flat opening last week, the SBI stock broke out of the range between ₹315 and ₹324. It made an intra-week low of ₹299.7, but bounced up from that level as ₹300 is a strong support. However, the upward movement was capped by a resistance at ₹324 and the stock closed the week at ₹321.9, moving back into the range. The 61.8 per cent Fibonacci retracement level of the previous downtrend is at ₹324, making the level a significant one. But the bounce-back looks strong and will most likely lift the price above ₹324 in the coming days. The 21-day moving average continues to remain above the 50-day moving average, maintaining the near-term outlook on the upside. The daily relative strength index, after a blip, is showing an uptick, but the moving average convergence divergence indicator has started to show weakness. If the stock continues to move up, breaking out of ₹324, it can possibly rise to ₹335 in the coming days. However, if the resistance holds and the stock declines, it can be expected to decline to ₹300.

ITC (₹250.6)

The stock of ITC fell throughout last week and closed with a loss, consecutive in the last five trading sessions. Since the major trend is on the downside, the bears seem to have quickly gained traction on the reversal, negating the breakout of ₹263 in the previous week. At ₹250 level, the stock is hovering around the 50-day moving average. This level coincides with the 50 per cent Fibonacci retracement of the previous bull trend and can thus act as a good support. But the daily relative strength index has dipped below the mid-point level of 50 and the moving average convergence divergence indicator has slipped into the negative territory. Both conditions are considered as indicators of bearishness, and the stock will most likely fall in the coming days. On the downside, the stock might find support between ₹247 and ₹250. A break below that level can pull down the price to ₹242 levels. Alternatively, if the stock appreciates from the current level, it will face hurdles at ₹258 and ₹263. The stock declined by 3.8 per cent last week.

Infosys (₹703.9)

The recovery in Infosys stock looks to have taken a pause as it appears to have entered a consolidation phase. The price has been oscillating between ₹690 and ₹725 for the past two weeks. Until the stock continues to trade above ₹690, it is highly likely that it will resume the uptrend in coming days. However, a prolonged sideways movement can be risky, leading to a decline. The daily relative strength index, like the price action, seems to have become flat, whereas the moving average convergence divergence indicator is still in the positive region, indicating strength. In a scenario where the stock breaks out of the upper boundary of the range at ₹725, it will most likely appreciate to ₹760. This is a critical level as the 61.8 per cent Fibonacci retracement of the previous bear trend coincides with the 50-day moving average. Beyond that level, the stock has the potential to advance to ₹800 over the medium term. However, if it starts to move southwards and breaches the lower boundary of the range at ₹690, it could depreciate to ₹665, below which the support is at ₹620.

RIL (₹1,470.8)

The stock of Reliance Industries gained in the latter part of last week after gradually declining during the week prior. This hints that the bullish trend might have resumed after the minor correction. On pullback, the price marked an intra-week low of ₹1,422.5, coinciding with the 21-day moving average. It then bounced from that level and ended the week at ₹1,470.8, retaining the bullish outlook. But looking at the oscillators, we can observe some weakness in the stock. The daily relative strength index is showing a down-tick following a bearish divergence; also, the moving average convergence divergence indicator has moved into the negative territory. Both indicators hint a potential trend-reversal. On the back of these factors, if the stock declines from the current level, it will find support at ₹1,430. A close below that level would result in a fresh low, taking the price to ₹1,400. However, if the stock gains bullish momentum and continues to advance, it will retest the lifetime high at ₹1,489.65. Resistance above that level is at ₹1,528.

Tata Steel (₹394.5)

The stock of Tata Steel was sluggish last week, and is hovering around the support at ₹395. Since it has extended the consolidation from the previous week, the recovery in the stock seems to be losing steam. The support at ₹380, coincided by the 21-day moving average, holds the key for the medium-term trend. So, as long as it trades above that level, the stock will have a bullish bias. But a break below that level could shift the trend to bearish. Since the overall trend is on the downside, this might result in a sharp depreciation. The daily relative strength index along with the moving average convergence divergence is showing a downward bias as it entered the negative territory. So, if the price weakens from the current level, the stock might slip towards the support at ₹380 in the near term, below which the support is at ₹360. On the other hand, if the stock starts moving on the upside, it will immediately face a resistance at ₹400. Above that level, the hurdle lies at ₹418 — the 50 per cent Fibonacci retracement level of the previous downtrend.

Published on November 17, 2019
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