I have bought Tata Steel at ₹750. What is the short-, medium- and long-term outlook?
Roshan Mayani
Tata Steel (₹889.6): In March 2020, the stock took support at ₹250 and bottomed out. Since then, it has been in a long-term uptrend. While trending up, the stock breached a key resistance at ₹600 and ₹700 in December 2020 and February 2021 respectively. Subsequently, these levels have turned into key supports. Both the medium and short-term trends are up for the stock. It trades well above the 21- and 50-day moving averages. However, the stock had recently encountered another key long-term resistance at ₹900 and continues to test this barrier.
The weekly relative strength index is featuring in the overbought territory and displaying negative divergence, implying that short-term trend reversal is possible. Hence, a downward reversal from the current resistance can drag the stock down to ₹850 and then to ₹800 levels in the short term. A strong fall below ₹800 will alter the short-term uptrend and pull the stock lower to ₹745 and then to ₹700 levels over the medium term. You can consider booking partial profit at current levels and stay invested with a stop-loss at ₹835 levels. An emphatic breakthrough of the current resistance level of ₹900 will reinforce the bullish momentum and take the stock northwards to ₹950 and then to ₹1,000 over the medium term. Investors with a long-term horizon can stay invested with a long-term stop-loss at ₹580 levels.
What is the technical view on REC?
Narasingh Mohanty
REC (₹127.1): Following a medium-term uptrend, the stock of REC had encountered a significant long-term resistance in the band between ₹155 and ₹160, which had limited its rally in February and mid-March this year. Subsequently, the stock changed direction, triggered by negative divergence on the weekly relative strength index and also forming a bearish engulfing candlestick pattern on the weekly chart. The stock has been in a short-term downtrend over the past one month. It had decisively breached a key support at ₹135 in late March this year and continued to trend downwards. Strengthening the downtrend, the stock slumped 3.8 per cent last week and breached the next key support at ₹130.
The daily RSI has entered the bearish zone from the neutral region and the weekly RSI continues to chart downwards in the neutral region. The medium-term outlook is bearish for the stock. A fall below ₹122, which is an immediate support, can drag the stock down to ₹114 and then to ₹110 in the short term. A further decline below ₹110 will mitigate the medium-term uptrend and pull the stock down to ₹100. Next support is at ₹92. But a strong break above ₹140 is needed to alter the bearish outlook and take the stock higher to ₹147. Subsequent barrier is in the band between ₹155 and ₹160.