Tata Steel: Short-Term Buying Opportunity

September 18, 2014 . FundsIndia Desk

The stocks from the metals sector took a drubbing in the recent weeks after the developments relating to the coal block allocations. Tata Steel too was a casualty  and the recent fall has pushed the stock to an area of support. As highlighted in the daily chart featured below, the stock has bounced off the middle line of the red pitchfork.

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The horizontal blue zone indicates key demand area which has also played its part in arresting the fall. Also pay attention to the way the price fallen from its peak of Rs.574.35. The fall has been gradual and the price has absorbed pockets of supply on its way down. This is a sign that the rally, if it happens, will be swift.

We believe that the stock has formed a short-term swing low yesterday at Rs.485.65. If this assessment is correct, then the Tata Steel stock could recoup lost ground quickly and head back soon to the recent high of Rs.574.35. Let’s discuss higher targets once the price clears Rs.574.35.

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The positive view would be invalidated only of the price falls below the key support zone at Rs.450. From a trading perspective, it would be impractical to have the stop loss at Rs.450.  We would therefore suggest a stop loss below yesterday’s low of Rs.485.65 for long positions.

Conservative traders may await a breakout past the upper parallel of the green pitchfork (roughly at Rs.513) and buy the stock on a subsequent downward pull-back.

(The view featured here is based on Technical Analysis of historical stock price action. Please read the Disclaimer)