Tata Steel Breakout From the 100-Week Consolidation Pattern

In Tuesday’s trading session, the Nifty showed strength as it rallied toward a lifetime high level. However, in the afternoon session, it faced selling pressure, erasing all intraday profits and closing near the opening levels. Meanwhile, the Nifty metal sector consolidated within a range, with one particular stock catching attention as it consolidated just below a significant breakout level of nearly 100 weeks.

The spotlight falls on Tata Steel Ltd, a holding company with a presence throughout the entire value chain of steel manufacturing, from mining and processing iron ore and coal to producing and distributing finished products. The company operates in various segments, including Agriculture, Automotive Steel, Construction, Consumer Goods, Energy and Power, Engineering, and Material Handling. Its diverse product portfolio includes Automotive Steels, Galvano, Tata Agrico, Astrum, Bearings, Pipes, Precision Tubes, Shaktee, Steelium, Tiscon, and Wiron. Founded on August 26, 1907, Tata Steel Ltd is headquartered in Mumbai, India.

As Asia’s first integrated private steel company, Tata Steel Ltd aims to increase its domestic steelmaking capacity to 30 Mn TPA by 2025.

Since reaching its peak of Rs 153.45 in mid-August 2021, the stock has been consolidating within a wide range of Rs 153.45 on the upper side and Rs 82.7 on the lower side. Notably, the lower end of this consolidation range aligns with a retracement support level of over 50% from the impressive rally that began in April 2020, at the level of Rs 25.10, as seen on the weekly chart. In the recent trading week, the stock experienced strong buying interest, leading to an upward movement from the support of the 5-week moving average (5WMA).

By drawing a trendline connecting the highs of mid-August 2021 (Rs 153.45 level) and the last week of January 2023 (Rs 124.15 level), we can identify a breakout trendline representing a consolidation pattern lasting nearly 100 weeks. Interestingly, this week, the stock is trading just below the trendline. A close above this trendline level (Rs 117 level) on a weekly basis will confirm the breakout. If the breakout occurs, the stock has the potential to rise to Rs 140, indicating a gain of approximately 20% from the breakout level (Rs 117 level). 

Swing traders and short-term investors should consider adding this stock to their watchlist.

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.