Tata Steel, Vedanta: Rally in metal stocks may just have begun, charts show

The Nifty Metal index is struggling to sustain above the 3,600 mark. However, once breached decisively, an up move towards 4,000 levels can not be ruled out.

Metal stocks extended their gains into second day on Tuesday as supply crunch in the commodities' market pushed spot prices higher. At 11:37 am, the Nifty Metal index was ruling 2.3 per cent higher compared with a 0.7 per cent rise in the benchmark Nifty50 index.

Among individual stocks, Hindustan Copper, Hindalco, Moil, and NMDC surged between 3 per cent and 7 per cent while Jindal Steel, Tata Steel, Nalco, Midhani, and JSW Steel gained up to 3 per cent.

According to N S Ramaswamy, head of commodities at Ventura Securities, expectations of a historic deficit of raw material amid rising demand, signal of tightness on London Metal Exchange (LME), hopes of the US and Europe stimulus, revival of global inflation, and clean-energy transition have changed sentiment over the past one and a half month.

Going forward, Bhavik Patel, senior technical analyst (commodities) at Tradebulls Securities expects metal prices to remain high "as post crisis demand will outstrip near term supply". Outlook is positive for base metals and we might see some technical pullback looking at the overheated market,” he adds.

Here's how the stocks look from technical viewpoint:

NIFTY METAL: The index is struggling to sustain above the 3,600 mark. However, once breached decisively, an up move towards 4,000 levels can not be ruled out. Moreover, a break above the 66 level on the Relative Strength Index (RSI) index may further add strength on the upside, daily chart shows. The overall trend is bullish with the support of 3,400 – 3,450 levels. CLICK HERE FOR THE CHART

TATA STEEL LTD (TATASTEEL): This stock has continuously witnessed selling pressure above Rs 700 mark. Unless a decisive close, supported by strong volume, does not occur above this resistance zone, the upside bias could see a selling pressure. On the downside, a closing basis support is placed at Rs 660 levels, which is consistent with the 50-days moving average (DMA), as per daily chart. CLICK HERE FOR THE CHART

STEEL AUTHORITY OF INDIA (SAIL): Although the stock of the state-owned firm has used the support of 50-DMA (placed at Rs 65.5) to maintain the bullish sentiment, the stock price has been unable to break above this level. Thus, the higher side resistance in the range of Rs 74 to 70 levels needs to be firmly conquered. However, even as the Moving Average Convergence Divergence (MACD) stands firm above the zero line, the expected upside is not strong. The support comes at Rs 62 levels. CLICK HERE FOR THE CHART

VEDANTA LTD (VEDL): The stock is rising with a "Higher High, higher low" formation, as per the weekly chart. This up move is intact till it does not breach the 160 mark over the medium-term. The trend me push the stock towards Rs 220 and Rs 232 levels. Furthermore, weekly charts show underneath bullish sentiment in the stock as it witnessing buying momentum even in the overbought territory of RSI. The closing basis support comes at Rs 190 mark, as per the daily chart. CLICK HERE FOR THE CHART

JINDAL STEEL & POWER (JINDALSTEL): With a support placed at Rs 306 mark, the stock is expected to rally in the direction of Rs 350 and Rs 365 levels, as per the bullish candle on the daily chart. The recent reversal nearing Rs 310 further strengthened the upside bias. Also, the RSI has managed to uphold the positive bias above the 60 value which suggests further bullish momentum. A move above Rs 336 may see volume-based buying, which may help the stock claim a new 52-week high. CLICK HERE FOR THE CHART