Tata Steel, Vedanta: Tech charts signal more upside in metal stocks

The Nifty Metal index scaled its fresh 52-week high of 3,586.90 in Tuesday's session, thus extending its rally that has seen the index rise 19.6 per cent over the last one year (till January 11, 2021). In comparison, the benchmark Nifty50 index has gained 17.47 per cent in the same period, ACE Equity data show.

Going forward, analysts at Phillip Capital expect metal companies to report further improvement in operating performance in Q3FY21 results as sharp imprvoement in realisation would outweigh marginally lower volumes.

"Strong demand from China and gradual improvement in the rest of the world propelled meaningful increase in commodity prices (especially ferrous), allowing domestic players to also take sharp price hikes. With domestic demand also rebounded to pre-Covid levels, mills have shifted back their focus to selling in domestic market which gives better margins," it said, in a report dated January 6, 2021.

"While Q2 witnessed meaningful jump in volumes, Q3 would witness the price increase to take effect in financial performance despite some volume moderation. Most of the steel mills are expected to report Rs 4,000-5,000/t sequential hike in blended realisations while volumes are expected to be lower to flat for most mills," it said.

Here's how the metal stocks look from a technical viewpoint

NIFTY METAL: The index has hit a new 52-week high of 3,596.90, on the back of optimistic sentiment. The overall trend is up, after crossing the 200-weekly moving average (WMA) in December 2020. The trend is highly strong with formation of the "Higher High, Higher low" pattern. The medium-term trend has a support of 3,300 levels and till the index defends it with aggressive volumes, the uptrend may see a rally in the direction of 4,000 mark. The immediate closing basis support falls at 3,400 levels. CLICK HERE FOR THE CHART

Tata Steel Ltd (TATASTEEL): The recent sessions have seen this stock make a new all-time high and exhibiting a firm upward trend, as per the monthly chart. The stock has seen an extensive rally in the overbought condition of Relative Strength Index (RSI), illustrating firm strength. The medium-term support comes at Rs 650 with a trend heading towards Rs 800 levels. The immediate support comes at Rs 675 levels. CLICK HERE FOR THE CHART

Vedanta Ltd (VEDL): This stock has managed to sustain above 200-WMA, placed at Rs 164 levels. This breakout is well supported by Moving Average Convergence Divergence (MACD), which has made a positive crossover above the zero line. This suggests that the momentum and trend may continue to remain in the upward direction in coming sessions, as per the weekly chart. The immediate support comes at Rs 170 levels. And the overall trend is moving in the direction of Rs 200 mark. CLICK HERE FOR THE CHART

JSW Steel Ltd (JSWSTEEL): JSW Steel stock is inching towards making a new all-time high of Rs 417 as per the momentum on the daily chart. It has doubled in less than six months and the underneath strength is still showing upside bias. Going forward, a breakout above Rs 420 may see a rally towards Rs 450 and Rs 470 levels with a closing basis support of Rs 400 levels. The counter is gradually rising with the support 50-DMA as well. CLICK HERE FOR THE CHART