Technical Analysis

Weekly Trading Guide

Gurumurthy K | Updated on January 09, 2018 Published on August 06, 2017

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SBI (₹305.4)

SBI was volatile last week. It surged over 5 per cent but fell-back sharply from the week’s high and closed just 2 per cent higher for the week. Supports are at ₹300 and ₹295. The near-term view will turn negative only if SBI declines below ₹295. Such a fall can drag it to ₹288 or ₹286 – a key short-term support. Further fall below ₹286 looks less probable. Having said that, if the stock sustains above ₹295, a range bound move between ₹295 and ₹317 is possible for some time. A strong break above ₹317 can boost the momentumand take the stock higher to ₹327 – a key long-term trend resistance. If the stock manages to breach above ₹327 decisively, the upmove can extend to ₹332 or ₹335. Traders and investors should remain cautious and closely watch the price action once the stock tests this crucial resistance level of ₹327. Traders can hold the long positions with the revised stop-loss of ₹282 and for the target of ₹320. Move the stop-loss higher to ₹302 as soon as the stock moves up to ₹315.

ITC (₹280.7)

ITC fell 3.6 per cent last week. The short-term outlook is bearish. Immediate support is at ₹279. But the stock is vulnerable to break below it and fall to ₹272 — the 61.8 per cent Fibonacci retracement level or ₹271 — the 200-day moving average support. If the stock manages to bounce from the ₹272-₹271 support, a relief rally to ₹280 or ₹282 can be seen. A range-bound move between ₹270 and ₹285 is possible. But if ITC breaks below ₹271 decisively, it can decline to ₹267. Further break below ₹267 can drag it to ₹260. A key long-term support is poised in the ₹260-255 band, which may halt the downtrend. Long-term investors can buy the stock at ₹260. An eventual upward reversal from ₹260 will keep the uptrend that has been in place since March 2016 intact. In such a scenario, the downside pressure will ease and ITC can move up to ₹280 or ₹285. The stock may consolidate in the ₹260-290 band or ₹300 range before a fresh leg of the long-term up-move begins.

Infosys (₹985.3)

Infosys broke above the resistance at ₹1,005 last week as expected. But the stock had failed to sustain higher. It reversed lower sharply from a high of ₹1,021, giving back all the gains made during the week. Immediate resistance is at ₹993. Immediate outlook is not clear. Inability to break above this hurdle can drag it to ₹970 or ₹965 in the coming days. If the stock manages to bounce from the ₹970-₹965 support zone, a bounce back move to ₹1,005 can be seen. A strong break and a decisive close above ₹1,005 can boost the momentum and take it up to ₹1,035 and ₹1,045. A downward reversal from ₹1,045 will increase the likelihood of the stock falling back to ₹1,000. It will keep the broad ₹900-₹1,045 sideways range, that has been in place since November 2016, intact. But if Infosys breaks below ₹965, it may come under pressure. This can drag it lower to ₹930 or ₹925. Then, the possibility of the stock revisiting ₹910 and ₹900 levels will also increase. Investors can hold the long positions.

RIL (₹1,622.5)

The key medium-term resistance at around ₹1,650 is holding well. RIL surged to ₹1,665 last week but failed to sustain higher and had reversed lower from there. A strong break and a decisive weekly close above ₹1,650 is needed for the upmove to extend further. Inability to bounce from current levels in the initial parts of this week can pull the stock lower to ₹1,600 or even ₹1,580. If RIL manages to bounce higher from ₹1,580, it can move up to ₹1,650. A sideways consolidation between ₹1,580 and ₹1,650 is possible for some time. But if the stock breaks below ₹1,580 decisively, it will signal the beginning of a corrective fall. Such a break can drag RIL lower to ₹1,550 or even ₹1,535 initially on the back of profit booking. Further fall below ₹1,535 will the increase the likelihood of the corrective fall extending to ₹1,500 and ₹1,470. Since the stock has risen sharply in a short span of time, this corrective fall is needed. Investors can continue hold the long positions. Revise the stop-loss to ₹1,565.

Tata Steel (₹575.5)

Tata Steel surged over 4 per cent last week. A key long-term resistance is poised at ₹580. A test of this hurdle looks likely in the coming days. A strong break and a decisive close above ₹580 will pave way for a fresh rally. The stock can then test ₹600 initially. Further break above ₹600 will see the up-move extending to ₹625 and ₹650 levels. On the other hand, if Tata Steel fails to break above ₹580 and reverses lower, it can pull the stock down to ₹540 or ₹535. As mentioned last week, cluster of supports are poised at around ₹535; so, an immediate break below this support level is less probable. As such, a range-bound move between ₹535 and ₹580 is possible for some time in such a scenario. The outlook will turn negative only if the stock declines below ₹535. Such a fall will increase the likelihood of the stock revisiting ₹500 levels thereafter. Investors can hold the long positions. Revise the stop-loss higher to ₹525.



Published on August 06, 2017
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