Stock Fundamentals

Trading pick of the week: JSW Steel (₹375.6): Sell

Yoganand D | Updated on January 23, 2021

Investors with a medium-term perspective can sell the stock of JSW Steel at current levels. The stock was in a long-term downtrend since it recorded a new high at ₹427.5 in September 2018, until it found support at ₹132 in April 2020. Triggered by positive divergence, the stock changed direction in April last year and has been on an intermediate-term uptrend since then.

In September 2020, the stock took support at around ₹258 and continued to trend upwards. It has been on a medium-term uptrend since September. However, the stock encountered a key long-term resistance in the band between ₹405 and ₹415 in early January this year and began to decline. This resistance zone limited the upside for the stock. Negative divergence has triggered the trend reversal.

On last Friday, the stock slumped 4.5 per cent with above average volume, breaching a key support at ₹383, as well as the medium-term uptrend line decisively. This fall has strengthened the short-term downtrend. The daily relative strength index features in the neutral zone and the weekly RSI is correcting from the overbought territory. Taking a contrarian view, the short- to medium-term outlook is bearish for the stock. It has the potential to trend downwards and reach the price targets of ₹350 and ₹320 over the medium term. Traders with a medium-term view can sell the stock with a stop-loss at ₹405 levels.

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Published on January 23, 2021
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