After surging about 68 per cent in 2021, the BSE Metal index turned volatile in 2022. The index rose to a high of 23,743 in April 2022 and then tumbled 37 per cent giving back all the gains to a low of 14,853 in June that year. Thereafter, the index has risen back very well.
The year 2023 began on a weak note with a sharp 10 per cent fall in February, But since then, the index has been recovering well, but at a slow pace. On the charts, strong bounce after the sharp fall witnessed in 2022 is very significant. That keeps the overall picture very positive for the index from a long-term perspective.
The BSE Metal index has room to surge over 20 per cent from current levels in the coming months. The index is currently at 21,196. Here is the technical outlook for the BSE Metal index based on charts.
Bullish signals
As mentioned above, the bounce from the 2022-low of 14,853 is very significant. That has happened from just above a strong long-term trend resistance-turned-support level of 14,840.
On the weekly chart, the 21-Week Moving Average (MA) has started to turn around from just above the 100-Week MA. Additionally, the 55-Week MA is on the verge of crossing above the 100-Week MA
Looking at the daily chart, historically, the 200-Day MA has been a key indicator to watch. The 200-Day MA has acted as a strong resistance in all the downtrends and has supported the downside well in all the uptrends. Currently, the BSE Metal index is poised well above the 200-Day MA. As such, this indicates that the trend is up and the 200-Day MA can act as a good support going forward.
All the above-mentioned indicators on the charts strengthens the bullish case for the index.
Inverse head and shoulder
The price action on the weekly chart since 2021 indicates an inverted head and shoulder formation. The index has just broken above the neckline resistance of this pattern at 21,000. This leaves the chances high for the index to stay above 21,000 in the coming weeks. Interestingly, the lows of both the shoulders (in the pattern) have taken support from a trendline support that comes up from the 2014-high. This indicates that the pattern formation is strong.
Long-term outlook
There is a strong support cluster in the broad 20,000-19,000 region. As mentioned above, there is an immediate support at 21,000 itself. So, broadly the chances are looking high for the index to sustain above 20,000, going forward.
Resistance is around 22,300. Failure to break this hurdle immediately can keep the index in a range of 20,000-22,000 for some time. But eventually the index is likely to breach 22,300. Such a break will see the BSE Metal index targeting 26,500 over the next one year.
Stock to watch
Within the index, Tata Steel and JSW Steel are looking good on the charts. Investors can consider these from a long-term perspective. Investors can do the due diligence before entering these stocks. We also suggest having proper risk management strategy in place if you intend to buy these shares.