Technical Analysis

Weekly Trading Guide

GURUMURTHY K | Updated on January 10, 2018 Published on September 10, 2017






Near-term view is negative for SBI (₹271.9)

After oscillating around the 200-day moving average for three consecutive weeks, SBI broke and fell below this support last week. The near-term outlook is negative. The stock can test the crucial support level of ₹268 in the coming days. If it manages to bounce from ₹268, a relief rally to ₹273 is possible. But if SBI breaks decisively below ₹268, the selling pressure may increase. Such a break will see SBI tumbling to ₹251 or ₹245. Charts indicate a high possibility of the stock falling to ₹251 or ₹245 in the coming weeks. Cluster of supports are seen between ₹251 and ₹245. The price action after testing this support zone will be key in deciding the next trend. Traders with a medium-term perspective can go short at current levels. Accumulate shorts on intermediate rallies at ₹275 and ₹278. Keep the stop-loss at ₹282 for the target of ₹253. Revise the stop-loss lower to ₹270 as soon as the stock moves down to ₹267. The outlook for the stock will turn positive only if it breaks above the ₹280-285 resistance region decisively, which looks less probable at the moment.

ITC likely to test a long-term support (₹272.45)

Two weeks of narrow, range-bound move ended last week as ITC tumbled 4 per cent, breaking the range below ₹279. Immediate support is at ₹269. If the stock manages to sustain above this support and reverses higher in the coming days, the downside pressure will ease. In that case, there is a strong likelihood of the stock moving higher to ₹280 and ₹285 once again. In such a scenario, a range-bound move between ₹269 and ₹285 is possible for some time. A breakout on either side of ₹269 or ₹285 will then decide the next move for the stock. But ITC may come under more pressure if it fails to reverse higher from ₹269 and breaks below it. Such a break can drag the stock lower to ₹262-260 or even ₹255. As being reiterated, the region around ₹260 is a key long-term support and a fall below it is less likely. A strong bounce from there breaking above ₹270 levels will signal the beginning of a fresh leg of long-term upmove. Investors with a long-term perspective can start buying the stock at ₹263. Accumulate long positions at ₹260 and then at ₹258.

Infosys likely to fall in the near term (₹884.4)

Infosys fell 4 per cent last week, breaking below the psychological support level of ₹900. The near-term outlook is bearish. Immediate resistance is at ₹900 and the next key resistance is at ₹918. A fall to ₹865 is likely in the coming days. If the stock manages to reverse higher from ₹865, it can move up to ₹900 or ₹918 thereafter. The downside pressure will ease only if the stock breaks above ₹918 decisively, which looks less probable in the near term. A strong break below ₹865 will increase the downside pressure. Such a break can drag the stock lower to ₹830 or ₹827. However, the current fall is likely to halt in the ₹830-827 region — a key, long-term support zone. A long-term trend line as well as the 100-month moving average are poised in this region. As such, a break below this support zone is unlikely. A strong upward reversal from the ₹830-827 support zone will have the potential to take Infosys higher to ₹950 over the medium term. It will also signal the beginning of a fresh leg of a long-term uptrend. Investors holding long positions can accumulate at ₹870 and ₹850.

Resistance caps the upside in RIL (₹817.15)

RIL was up for the second consecutive week and closed 1.5 per cent higher last week. It made a high of ₹832.7 on Thursday and has come off from there. This indicates lack of buying interest to take the stock higher. Also, the price action on the chart signals that the recovery move that has been in place after the stock fell over 4 per cent in the second week of August, lacks strength. This indicates high possibility for the stock to fall to ₹795 or ₹793 in the coming days. A further break below ₹793 will increase the likelihood of the stock extending its fall to ₹775 or even ₹770 thereafter. Such a down-move will indicate a double-top reversal pattern on the charts. A strong break below ₹770 will confirm this pattern and will enhance the possibility of the stock tumbling to ₹732 - the key 21-week moving average support over the medium-term. As such the price action in the coming weeks will need a close watch. The level of ₹833 is a key resistance to watch. The stock will gain fresh momentum only if it breaches above this hurdle decisively. Such a break can take RIL higher to ₹870 thereafter.

Tata Steel retains the momentum (₹655.5)

Tata Steel inched up by 0.9 per cent and closed higher for the sixth consecutive week. The stock marked a high of ₹663.5 and has come off from there. Resistance is at ₹666. A strong break and decisive weekly close above this hurdle will pave the way for the next targets of ₹685 and ₹700. The level of ₹700 is a key psychological resistance. An immediate break above this level is less likely. As such there is a strong likelihood of a sharp corrective fall after testing this hurdle. On the other hand, if Tata Steel sustains below ₹666 in the coming days, it can fall to ₹645 in the near term. A further fall below ₹645 can drag the stock lower to ₹636. The 21-day moving average at ₹632 is a key short-term support for the stock. The stock may come under selling pressure on the back of profit booking if it breaks below this support. Such a break can drag Tata Steel lower to ₹610 or even lower. Investors can hold the long positions. Revise the stop-loss higher to ₹620. Book partial profits at ₹680 and then move the stop-loss for the rest of the holdings to ₹640.

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Published on September 10, 2017
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