Technical Analysis

Weekly Trading Guide

| Updated on January 09, 2018 Published on August 20, 2017

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Near-term view is negative for SBI (₹278.6)

SBI hovered above the 200-day moving average (₹276) support in a narrow range last week. Near-term support is at ₹275. If the stock manages to sustain above this support, an intermediate bounce to ₹288 or ₹290 is possible. Only a strong rise past ₹290 will ease the downside pressure. But at the moment, the upside is expected to be capped at ₹290. As such, the short-term view remains negative. The stock is likely to break below the support at ₹275 in the near term. Such a break can take it to ₹268 initially. As mentioned last week, there is an early sign of a tip formation of the uptrend that had begun in February 2016. A strong break and a decisive close below ₹268 will confirm this. In such a scenario, the possibility of SBI falling to ₹250 or ₹245 will increase. Traders can stay out of the market at the moment. However, short positions can be initiated on rallies at ₹286 with a stop-loss at ₹292. Accumulate shorts at ₹288. Revise the stop-loss lower to ₹284 as soon as the stock moves down to ₹280.

Resistances can cap the upside in ITC (₹281.8)

ITC found strong support around ₹270 and has reversed higher. The stock was up 3.7 per cent up last week. Immediate resistances are at ₹285 and ₹287, which can be tested this week. If ITC manages to breach ₹287, it can extend its upmove to ₹295. But a downward reversal from ₹287 can take the stock lower to ₹275. Further break below ₹275 can drag it to ₹270. An upward reversal from ₹270 can keep the stock range-bound between ₹270 and ₹287. But a fall below ₹270 can bring fresh selling pressure. Such a fall will increase the likelihood of the stock falling to ₹262 or ₹258 thereafter. However, as being reiterated in this column over the last few weeks, the region between ₹260 and ₹255 is a strong support. A break below this support zone is unlikely. A strong bounce from this support zone will keep the uptrend that has been in place since 2016 intact. It will also increase the possibility of the stock revisiting ₹300 levels thereafter. Long-term investors can buy the stock at ₹262. Accumulate at ₹260 and ₹258.

Infosys hovers above crucial supports (₹923.1)

Infosys plummeted over 13 per cent on intraday trades on Friday. The resignation of Vishal Sikka, the company’s CEO & MD, triggered this sell-off in the stock. The stock touched a low of ₹884.4, but has managed to bounce back to close above the key support level of ₹900. Intermediate support is at ₹917. A fall below it can take the stock lower to ₹900. A strong break and decisive close below ₹900 can drag the stock lower to ₹870 initially. Further break below ₹870 will increase the likelihood of the stock extending its fall to ₹850 or ₹830 thereafter. A strong long-term trend support is poised at ₹830, which can halt the downtrend. The stock can reverse higher from this support. Investors holding long positions can accumulate at ₹850 and ₹830. On the other hand, if the stock manages to sustain above ₹900, a range-bound move between the levels of ₹900 and ₹970 is possible for some time. Broadly, the price action will need a close watch for a cue on whether Infosys can continue to sustain above ₹900 or not.

RIL likely to reverse lower again (₹1,575.4)

RIL moved up 1.9 per cent last week. But this bounce back lacks strength. The 21-day moving average resistance at ₹1,595 restricted the upside last week. If RIL manages to break above this hurdle, it can move up to ₹1,625. Further rally above ₹1,625 looks less probable at the moment. Short-term traders can make use of rallies to go short at ₹1,610 with a stop-loss at ₹1,640 for the target of ₹1,535. On the other hand, if the stock fails to break above the 21-day moving average resistance decisively, it can come under pressure. In such a scenario, the stock can fall to ₹1,540 or ₹1,520 in the short term. Further fall below ₹1,520 will increase the likelihood of the stock extending its downmove to ₹1,500 or ₹1,465. The level of ₹1,465 and the 21-week moving average at ₹1,430 are the key medium-term supports that may halt the current fall. An eventual bounce back from either of these levels signal a fresh leg of up-move in the stock. Long-term investors can consider re-entering long positions around ₹1,470 levels.

Uptrend is intact in Tata Steel (₹625.4)

Tata Steel continues to outperform the broader market. The stock surged for the third consecutive week and was up about 5 per cent last week. It made a high of ₹630 and has come-off slightly from there. The overall bullish outlook remains intact. Key support is in the ₹605-₹600 zone, which may limit the downside in the near term. Intermediate dips to this support may find fresh buyers. As long as the stock trades above ₹600, the possibility of a rally in the coming weeks to ₹680 or ₹700 levels is high. Investors can hold the long positions and retain the stop-loss at ₹575. Book partial profits around ₹680 levels. The near-term view will turn negative if the stock declines below ₹600. Such a fall can take Tata Steel lower to ₹580 — a key resistance-turned-support level. A bounce from there can take the stock higher to ₹600 and ₹625. But a strong break below ₹580 will increase selling pressure. Such a break will increase the likelihood of the stock extending its fall to ₹550 or ₹530 levels thereafter.

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Published on August 20, 2017
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