In the realm of investments, identifying opportunities that align with both technical indicators and fundamental analysis can pave the way for lucrative outcomes. One such prospect emerges within the domain of large-cap metal stocks, presenting an enticing avenue for investors seeking robust returns.

A look at the daily chart shows that an uptrend started with TATASTEEL crossing above Rs. 110 levels in June 2023; this also marked the stock crossing above all three key moving averages. Since then, by and large, the stock has remained on a rising trajectory; the corrective phase that was seen between September and November last year found support at the 200DMA which subsequently led to the resumption of the uptrend.

Zooming out to see a bigger picture on the higher timeframe weekly charts, technically speaking,  it reveals compelling insights into the trajectory of this stock. Following a peak near Rs. 153 in July 2021, a corrective decline ensued, persisting for the subsequent year. However, the tide gradually turned as the stock began to form higher tops and higher bottoms, indicative of a shifting  underlying trend. Crucially, this move facilitated a notable ascent for the stock as it took it above both the 50-week and 100-week moving averages, underscoring a bullish undertone in the long-term trend. 

Recent developments have further bolstered confidence in the stock’s trajectory.  The stock recently tested the previous resistance near Rs. 150 levels  leading to the formation of a classical double-top on the weekly chart. Subsequently, a breakout from this established resistance ensued, accompanied by a surge in upside momentum. Despite a brief stint of selling pressure witnessed in the benchmark index, the stock remained resilient, retracing back to its breakout level before showcasing signs of resumption.

This resurgence has been underpinned by a uptick in trading volume, corroborating the prevailing bullish sentiment. Furthermore, indicators such as the On-Balance Volume and Relative Strength (RS) have lent credence to the optimistic outlook. Both indicators have experienced breakout moments from downward-sloping trendlines, signaling a favorable shift in momentum. Notably, the RS indicator showcases that the stock is outperforming the benchmark Nifty 500 index, further accentuating its appeal. 

Intriguingly, the RRG JDK RS Momentum indicator has crossed the 100 mark, indicating a notable uptick in momentum. This development augments the investment case, offering a compelling  opportunities for investors. 

Importantly, the Fed has hinted at three rate cuts this year. Even if one of two such rate cuts happens, it will keep the Dollar Index under check which is likely to aid the metal and commodities stocks. From an investment perspective, the breakout from a longstanding resistance after nearly two and a half years underscores the bullish momentum underlying this stock. Consequently, it presents an attractive proposition for investors, with the potential for an upside of approximately 10%. As a precautionary measure, any price movement below Rs. 140 may warrant reconsideration.

In summation, the confluence of technical indicators, coupled with favorable market dynamics, positions this large-cap metal stock as a promising investment opportunity.

– Foram Chheda, CMT