Vedanta: An interesting play if you have an appetite for risk, charts say

Vedanta has been in news over the past few weeks given its bid to delist shares from the bourses. The company failed to get the minimum bids required to delist, the indicative discovered price for the commodity major came in at Rs 320, 3.7x its floor price.

Meanwhile, according to reports, various aspects of Vedanta’s failed delisting bid have come under the Securities and Exchange Board of India’s (Sebi’s) scanner. READ ABOUT IT HERE

On Tuesday, the stock hit an intra-day high of Rs 103.95 on the BSE, up nearly 6 per cent. In comparison, the S&P BSE Sensex was trading flat at 40,670, up a marginal 77 points at 10.15am.

At the fundamental level, things have been improving for the company, and this could reignite sentiment, analysts say. Vikas Jain of Reliance Securities, for instance, says the stock can return to a near-term high of Rs 140 levels. The metal sector has seen upswing over the past few months and with higher commodity prices, the outlook remains positive.

Here's a quick check on what technicals suggest.

Vedanta Ltd (VEDL): If we can put aside last four sessions for a moment, then we are looking at a stock that has doubled from the low of Rs 60 in April 2020 to a high of Rs 141.50 recently. The price has actually doubled in six months, yet this counter has seen a terrible fall in last four sessions. This is due the lack of follow-up buying, as per the daily chart.

From the month of July to September, 2020, Vedanta has seen an average volume, rather has seen several sessions that witnessed below “average volume”. This clearly suggests the price is building the strength to drive to higher levels, which inevitably restricted by strong resistance of 100-weekly moving average (WMA) in the range of Rs 141 to Rs 143. And the recent high was Rs 141.50 from where the stock has seen a negative reversal. It failed to hold the price’s strength as volume scenario deteriorated.

From the chart trends, one can clearly conclude that till Vedanta does not see strong buying and positive close, then the chances of the stock going up seem slim. The counter needs to move up to Rs 115 level on good volume and then stabilise there for a few sessions for some strength to come back. Unless this happens, any rise will be met with selling pressure and a strong build-up of short positions, as per daily and weekly charts CLICK HERE FOR THE CHART

At current levels, Vedanta is struggling to build a strong base, as volume and price are fluctuating wildly. The immediate support comes at Rs 90 levels, if breached on the weekly scale can take the counter to Rs 80 and eeven Rs 75 levels.