Tata Steel ltd

In January 2008, the stock of Tata Steel scaled to its all time high of INR959 and from thereon we all witnessed the start of a massive correction in this stock which lasted for almost twelve months and in December 2008 itself it touched the bottom of INR146.

In percentage terms that was almost 85% correction from the highest levels. Time taken was just one month short of time cycle theorem tine
of 13 months.

From those lowest levels the uptrend began and that took the price of the stock to the levels of as high as INR741 in December 2010. If we count it in absolute term the top formed in December 2010 was lower than the one formed in January 2008.

In the next round of down trend, which took place after the top formation at INR 741, took the price of the stock down to the levels of INR196 in August 2013. In percentage terms that down fall was as almost 73.5%.

Though the top formed in December2010 was very low than the one formed on previous occasion, the percentage fall in second time was much lower than the fall that took place first time. So the bottom formed that way was higher in rupee term as well as in percentage retracement term.

So we can conclude here quite convincingly that the bottom formed in August 2013 of INR 196 is a firm bottom in place and that this bottom is not going to be breached or broken downside in any kind of next down move.

It can be said with confidence as the up move from the lower levels of INR196 took the price of the stock to the levels of INR 440 which is a very convincing up move from bottom.

What the current indicators and parameters are suggesting? Let us discuss it now. 13 DEMA is @353, 48 DEMA is @367 and 200 DSMA is @326. Similarly 13 WEMA is @369 and 48 WEMA is @350. 13 MEMA is @333. All near term moving averages are above the medium to long term moving averages. That indicates positivity in the stock still exist even after a sharp correction from the intermediate top of INR440.

RSI on Daily charts is at41, RSI on weekly charts is @ 46 and RSI on Monthly Charts is @47. RSI on all three time zone charts is in negative territory and still flowing down in the same territory indicates some weakness in the stock price.

Moving averages are in positive zone but are trending downside which is also indicating some weakness for short term. So a confusing scenario is emerging in the short term for the stock price and moves.

Therefore the importance now passes on to the immediate support and resistance levels.  A horizontal line drawn across the charts gives us the levels of INR294, INR330 and INR365.
Percentage retracement levels are INR269, INR294, INR324, INR369 INR404 and INR460. After a fall of 73.5% from top of INR741 till INR 196, an up move by the same percentage points comes to the levels of INR340.

So we herby conclude that for the time being in the short term traders should strictly adhere to rules of trading by keeping in mind the levels which we are summing up now.
Support levels: INR 324/ INR 294/ INR 269
Resistance levels: INR 350/INR 369/ INR 404

For a decisive trend reversal towards any side, the stock has to decisively close either below INR269 with very good volumes for a firm negative trend or has to close above 404 with very good volumes for positive trend.

Till then it’s a trader’s paradise with strict discipline keeping in mind the levels given here as above. A decisive close above INR404 will pave the way for an up move till INR465 and INR560. And a decisive close below INR 269 will make the way for retesting of the bottom of INR 196.

Equity: 971 cr    Book Value: 568    March 2013EPS: 54    Dividend: 80%
Face Value: 10

-Rajkishore Bang
Astro-Tech Analyst

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