Technical Stock Pick: JSW Steel finds support above neckline of 2-year consolidation; should you buy?

The iron & steel stock hit a record high of Rs 895 on 28th December 2023, but it failed to hold on to the momentum.

The stock found support 20-Days Moving Average in the January-February period and above 50-week Moving Average earlier in the month of March.

Interestingly, the 50-week Moving Average also coincides with the neckline of 2 years of consolidations where levels above 700 acted as a stiff resistance (since May 21’) while on the downside support was seen above 500.

On the daily charts, the stock found support above the 200-DMA earlier in March which suggests the possibility of a base formation.

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In terms of price action, the stock is now trading above both short- and long-term moving averages on the daily charts, which is a positive sign for the bulls.

“JSW Steel stock appears to have gone through a prolonged consolidation phase of 112 weeks, which is a strong indication of a potential breakout. However, it has now retreated and is testing the same level again,” Kapil Shah, Technical Analyst, Emkay Global Financial Services Limited and Trainer at FinLearn Academy, said.

“What's interesting is that the stock seems to be respecting the support level and is not breaching it, while at the same time showing disregard for the resistance level. This could be a sign of a bullish trend reversal,” he said.

“Furthermore, the stock took support at the 200-day long-term moving average, which is widely considered a strong technical support level in the stock market,” highlighted Shah.

This support level is often used by traders and investors to determine a stock's trend and make trading decisions accordingly.

There was a formation of a bear trap followed by a bullish continuation sign, which indicates that the stock might be preparing for a potential bull run.

“A bear trap is a deceptive move that lures traders into selling their shares, while a bullish continuation sign suggests that the stock is likely to continue its upward momentum. All these factors combined paint a positive picture for the stock's future performance,” added Shah.

“Stock offers a good buy opportunity to buy in the range of 810 with stop loss of 790 and upside potential of 860 to 880 level,” he recommends.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)