TATA STEEL TECHNICAL ANALYSIS

This Blog is for educational purpose only.

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Here, we are using Trendlines, RSI Indicator, Dow Theory and Candlestick Chart (weekly time frame) for this analysis.

Keyword:

Trend- Three basic trends are given below for basic understanding.

  • Bullish trend, price keep making new high, higher then previous high and new low, higher than previous low.
  • Bearish trend, price keep making new low, lower then previous low and new high, lower than previous low.
  • Sideways trend, price stuck in range bound area, where price keep making high near previous high and low near previous low.

Trendlines- In finance, a trend line is a bounding line for the price movement of a security. It is formed when a diagonal line can be drawn between a minimum of two or more price pivot points. A line can be drawn between any two points, but it does not qualify as a trend line until tested.

RSI- The relative strength index is a technical indicator used in the analysis of financial markets. It is intended to show the current and historical strength or weakness of a stock based on the closing prices of a required trading period.

Candlestick Chart- A candlestick chart is a style of financial chart used to describe price movements of a security, derivative, or currency. Each candlestick typically shows one day or any time frame you select, thus a one-month chart may show the 20 trading days as 20 candlesticks. 

Let's start our analysis,

When everything was falling badly in march, Tata steel's share price also made a new low with respect to it's downtrend but something was still missing, RSI Indicator was showing strong hold and it was clear that price may be falling but only by weak hands and fear factor.

Dropping a chart below for your clear understanding:

Let's understand with the help of chart. Green round marks are showing strong Bullish Divergence. This situation demonstrates that 'bears' are losing power and 'bulls' are ready to control the market again. Means after positive divergence, we should cut the short sell positions and add that script for bullish opportunity watchlist.

Trend-line on lower side is visible in upper chart, posting another chart below. Which show's there is valid trendline on upside of channel too, If that break then it will be it's 2nd bullish clear indicator after bullish divergence.
Observations:
1st we found Bullish Divergence.
2nd price made new low(dark blue round) which was higher then previous low(march low).
3rd resistance breakout with such big participation(volume).

These signals were more than enough to take position just at the time of breakout with high reward and low risk trade. Target was 2018 starting support area and stop-loss was last swing low(blue round).

Tata Steel's current position, screenshot below.

We will exit half position on Monday EOD and other half on any next bearish weekly candle. Target is achieved this week. Actually thing is, you can get good trade every week but few trades worth holding position and caring them till your target is totally different psychological journey.

How to find target?
Bullish divergence with march low started bulls journey in Tata steel. So, we calculated using march avg. low and upper trend-line price difference and then added same price difference from Upper trend-line break-out level. Posting chart below for clear understanding:
The above charts show how we calculated expected target range and effect of a Bearish Divergence which was visible in 2017 and then whole trend changed for 2 years+. Now with bullish divergence again trend changed to bullish. 2018 starting support was hard to break and then even 3 time tried to break in 2018 but unable to break, it can be hard this time too. No stock can run in single direction for long time, market's supply and demand play their roles. 

Now Tata steel can fall a bit and may be a new higher low will be there to give good opportunity to buyers for adding position or fresh bets.
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That's all from our side. We hope this analysis add-on some value. If yes, then you can add a comment below.

Thank you
Yachana & Sahil

Location: Haryana, India

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