Losing sheen! Don't lap up metal stocks yet, hint tech charts; here's why

The overall trend for metal stocks seems to be precarious, and a further downside cannot be ruled out

Metal shares witnessed their biggest meltdown in recent times on Monday as a debt crisis at one of China’s biggest property developers, Evergrande, led to a global decline in industrial metals and ore prices. The BSE Metal index tumbled nearly 7 per cent in trade in the last session. READ MORE

Should you enter the stocks at current levels or wait for them to turn cheaper? Tech charts suggest latter seems to be a better option. Here's why 

NIFTY METAL

Outlook: Index needs to show stability above 100-DMA

The index struggled to conquer 5,900 levels decisively, which resulted in a breach of 50-day moving average (DMA) and 100-DMA supports, according to the daily chart. The 50-DMA and 100-DMA are placed at 5,586 and 5,380 respectively. To build a positive momentum ahead, the index needs to cross and show stability above 100-DMA. When that happens, one can expect a recovery towards 50-DMA. On the flip side, if the index stays below 100-DMA, the negative sentiment may see an accelerated weakness towards 5,000 levels.   CLICK HERE FOR THE CHART
 
TATA STEEL LTD (TATASTEEL)
Outlook: Sideways or reversal move if 100-DMA is held

The gap-down closing on 28 August, 2021 has dismantled the positive bias as the stock failed to recover. The growing weakness led to breach of the support at Rs 1,380-level, which is the 50-DMA. The current stock momentum oscillates around 100-DMA set at Rs 1,256 and if it manages to hold ground signalling reversal action, then only one can expect some stability or sideways movement. The next support stays at Rs 1,100 which the counter may test if it fails to hold ground near 100-DMA. CLICK HERE FOR THE CHART
 
JSW STEEL Ltd (JSWSTEEL)
Likely target: Rs 600
Downside potential: 7%

A clear breakdown of the “Ascending Triangle” hints a downside towards Rs 600 level. The current weakness is supported by strong volumes indicating aggressive selling pressure. Such candlestick patterns reflect stiff resistances on reversal and the stock is likely to see negative sentiment. The higher side resistance stays at Rs 660 and Rs 680, according to the daily chart. The Moving Average Convergence Divergence (MACD) continues to trade below the zero line and now with a negative crossover, aggressive weakness is anticipated.  CLICK HERE FOR THE CHART
 
VEDANTA LTD (VEDL)
Likely target: Rs 300
Upside potential: 4%

The stock has held the support of 100-DMA since November, 2020 and as long as the MACD stays above the zero line, some reversal may emerge towards Rs 300 level, according to the daily chart. The 100-DMA is currently placed at Rs 281.80. The next crucial resistance is at Rs 311, till where the stock may rally if it absorbs the selling pressure at Rs 300-level.  CLICK HERE FOR THE CHART
 
STEEL AUTHORITY OF INDIA (SAIL)
Likely target: Rs 99
Downside potential: 8%

STEEL AUTHORITY OF INDIA has entered the oversold territory of Relative Strength Index (RSI); the momentum and direction have not been able to see any major recovery. This scenario reflects weakness and possible downward movement, that may re-test the support of 200-DMA set at Rs 99 level, according to the daily chart. The immediate resistance for the stock is at Rs 114 and 120-level.  CLICK HERE FOR THE CHART