Technical Analysis

BSE Metal Index turns lustrous

Yoganand D. | Updated on November 15, 2017 Published on January 14, 2012


The BSE Metal Index has jumped almost 10 per cent last week, with main contribution coming from Tata Steel that surged 14.6 per cent during the week. Among other gainers were Hindalco Industries, which added 12.7 per cent, Coal India, which advanced 7.4 per cent and Jindal Steel that jumped 8 per cent during the week.

BSE Metal Index constitutes 11 stocks in which Tata Steel enjoys the highest weight of 20 per cent. Coal India and Jindal Steel have 15.6 per cent and 15.2 per cent weights respectively, while Hindalco Industries and Sterlite Industries enjoy 12.8 per cent and 11.2 per cent weights respectively. The significant long-term resistance band between 18,000 and 18,500 halted the index from moving beyond this resistance during the year 2010.

It subsequently reversed downwards in January 2011 and has been on an intermediate-term downtrend.

While trending down, the index penetrated its long-term trend deciding level at 11,300 in November 2011 and accelerated lower to 9,200 levels. However, the index found support in the band between 9,200 and 9,500 in December 2011.

Taking support from this band and triggered by positive divergence in the weekly relative strength index and moving average convergence divergence, the index changed its direction.

We also notice formation of a falling wedge pattern spanning between October and December 2011, supporting the trend reversal. Last week's rally broke through this pattern. The index is now heading towards 11,300 resistance level.

Strong move above 11,300 will push the index higher to 12,150 and to 12,500. Next important long-term resistances above 12,500 are pegged at 13,300 and 14,000 levels. However, failure to move above 11,300 will reinforce the downtrend and drag the index down to 9,900 and 9,500. Tumble below 9,200 support can pull the index down to 8,000 and 7,000 levels in the long term.

Medium-term view

Since taking support in the zone between 9,200 and 9,500 last month, the index has been trending higher. It breached its 21- and 50-day moving averages recently. The daily indicators have entered into a positive territory, signalling bullish momentum.

However, the index is currently testing key resistance at around 10,900 levels. Reversal from this resistance will bring the index downwards to 10,200 and 9,775 levels. Subsequent, supports for the index are at 9,500 and 9,200.

On the upside, an emphatic break through of 10,900 will pave way for the index to rally to 11,300 and 11,700. Resistance above these levels are at 12,150.

Published on January 14, 2012

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.