Jindal Steel & Power poised at key base

The stock has significant long-term support at ₹135. As long as it trades above this level, the uptrend will remain in place

Here are answers to readers’ queries on the performance of their stock holdings.

Please advise me on Jindal Steel & Power bought at ₹224 and NMDC bought at ₹142. Should I average?

Naresh G

Jindal Steel & Power (₹176.4): The stock of Jindal Steel & Power has been in an intermediate-term downtrend since encountering a key resistance at ₹294 in January 2018. Following a corrective medium-term uptrend, the stock met with a vital resistance at around ₹240 in mid-September and resumed its downtrend.

Over the past two weeks, the stock has nose-dived almost 25 per cent. While trending down, the stock decisively breached its 200- and 50-day moving averages, and trades well below them.

However, following a sharp fall, the stock currently tests a key support as well as the 50 per cent Fibonacci retracement level of the prior uptrend in the band between ₹170 and ₹180.

Only a conclusive fall below this support band will strengthen the downtrend and drag the stock down to ₹150 in the short term.

The stock has significant long-term support at ₹135. As long as the stock trades above this base level, the uptrend will remain in place. Investors with a long-term perspective can stay invested, with a stop-loss at ₹130.

If you are a long-term investor, you can wait for the dust to settle in the market, as well as in the stock, and consider averaging at lower levels, with a stop-loss at ₹130. On the upside, a strong rally above the key resistance level of ₹200 can take the stock northwards to ₹225 and ₹240 levels. An emphatic breakthrough of the vital resistance level of ₹240 is required to alter the downtrend and take the stock higher to ₹270 and ₹300 levels in the long run.

NMDC (₹109): The stock of NMDC is also in an intermediate-term downtrend from the January 2018 peak of ₹162. However, after a medium-term corrective up-move, the stock met with a barrier at ₹124 in mid-September. Subsequently, the stock continued to trend downwards, resuming the intermediate-term downtrend.

On Friday, the stock plunged 5 per cent, with good volumes, breaching the key support at ₹113. The stock can extend its down-move and test the support at ₹100 in the short term. An upward reversal from this base level can take the stock northwards to the resistance in the ₹113 and ₹115 band.

A conclusive break above this resistance can bring in a bullish momentum and take the stock higher to ₹125 and ₹130 levels.

To alter the intermediate-term downtrend, the stock needs to move past the key resistance at ₹130.

Such a break can take the stock higher to ₹145 and then to ₹165 in the medium to long term. Key supports below ₹100 are at ₹95 and ₹90. You can average the stock at lower levels with a stop-loss at ₹95.

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