We zoom in on its prospects, as also that of two other stocks: Shanthi Gears and Kalpataru Power Transmission
What is the outlook for Tata Steel?
Hasmukh A Thakkar
Tata Steel (₹1,023.5): The stock price made a clear top at ₹1,534.6 in August last year. It has tumbled over 33 per cent from its high. The trend has reversed. The outlook is bearish now. The stock has room to fall further from here. Resistance will be in the ₹1,050-1,100 region. This has been capping the upside over the last couple of weeks. Immediate support is at ₹960. Tata Steel is more likely to break this support. Such a break can drag it down to ₹892 – the 61.8-per cent Fibonacci retracement support level. A break below ₹892 will see an extended fall to ₹785.
If you are holding this stock, it is better to exit at current levels. Wait for a fall to buy the stock again. For those considering entering this stock, buy 40 per cent of the intended amount at ₹910. Buy the rest at ₹810. The average purchase price will then be at ₹850. Keep a stop-loss at ₹680. Move the stop-loss to ₹960 when the stock price rises to ₹1,150. Exit the position at ₹1,500. A fresh rally from either ₹892 itself or from ₹785 will have the potential to take the price up to ₹1,500 levels again over the long term.
I am holding shares of Shanti Gears at ₹230. What is the short and long-term outlook?
Shanthi Gears (₹223.5): The stock came off sharply last week after hovering around a crucial long-term resistance level of ₹240. The price action on the weekly chart indicates that the stock has been struggling to breach ₹240 decisively over the last several weeks. So, you have to be very cautious as the chances are high to see a sharp correction. An immediate support is at ₹220. A break below it will increase the danger of the stock falling to ₹180 or ₹165 over the medium term. If you can withstand the loss, keep a stop-loss at ₹215 and hold it. If a bounce from ₹220 happens, then look to exit the stock at ₹285.
On the other hand, if your stop-loss is hit, then wait for a fall and buy the stock again at ₹185 and ₹170. For this position, keep the stop-loss at ₹135 and hold it. Trail the stop-loss up to ₹190 as soon as the stock moves up to ₹230. Move the stop-loss further up to ₹240 when the price reaches ₹260. Exit the stock at ₹300.
I am holding shares of Kalpataru Power Transmission at ₹386. What is the medium- and long-term outlook? Can we accumulate the stocks? If so, at what levels?
Kalpataru Power Transmission (₹364.45): The stock has been in a downtrend since August last year. Within this downtrend, there is a strong resistance around ₹400. A near-term support is at ₹320. Even if the stock manages to hold above ₹320, it must rise past ₹400 to ease the downside pressure. But that looks less probable as seen from the chart. There is a strong likelihood of the stock breaking below ₹320 in the coming weeks. Such a break can drag the price down to ₹240-220 in the next six months or so. Thereafter, a fresh long-term rally can begin targeting ₹500 and even ₹500 levels over the next couple of years.
If you intend to hold this stock for the long term, you will need a lot of patience to withstand the loss. Wait for a fall and accumulate at ₹245 and ₹225. Keep a stop-loss at ₹170. Move the stop-loss up to ₹310 as soon as the stock rises to ₹440. Revise the stop-loss further up to ₹490, as soon as the stock touches ₹540 on the upside. Exit the stock at ₹580.