Technical view on ITC

Currently, the stock of ITC Limited has divided the community of investors into two groups. One group comprises those who believe that it is incredibly attractive at the current levels while the other group is of the view that it’s a value trap. However, the question arises as to who is correct? Let’s check this from a technical perspective.

Going by the trend analysis and Dow Theory, if we look at the weekly chart of the stock, it is clearly in a downtrend since July 2017 thereby, making a series of lower tops and lower bottoms. The downtrend remains intact as long as the sequence of lower tops and lower bottoms sustain.

As of March 13, the stock had formed a low of Rs 134.60 and thereafter, witnessed nearly 56 per cent of the pullback rally. The pullback is halted between 50 per cent and 61.8 per cent Fibonacci retracement level of its prior downward move (Rs 266.30-Rs 134.60) and coincides with its long-term 200-day EMA level.

All the moving averages-based trade setups are showing bearish momentum. Further, Daryl Guppy’s multiple moving averages is also suggesting a bearish momentum in the stock.

Talking about the indicators, the leading indicator i.e. the relative strength index (RSI), is trading in a bearish territory in all the timeframes. On the weekly chart, the RSI is currently quoting at 35.30 levels and it is in a falling mode. Interestingly, the weekly RSI has not touched the 60 mark since May 2019. Moreover, the weekly MACD stays bearish as it is trading below its zero line and signal line.

Hence, technically, all the factors are currently aligned in support of the bears. On the downside, immediate support is placed in the zone of Rs 157- Rs 154 while major support is placed in the zone of Rs 139-Rs 134 level.