Metal Stock Breaks ‘Key Support’ of the Distribution Phase!

  • Stock Market Analysis

After a long time, the Indian markets are witnessing a massive sell-off. Till now, whenever a selling pressure was seen, it was matched with sufficient demand from the lower levels, especially from the local funds, hence our market kept on outperforming the global markets. 

Today, the benchmark Nifty 50 index tanked to 17,327 by 2:44 PM IST and some of the sectoral indices were trading with a cut of over 3%. The Metal index is down 0.92% because of a market-wide fall and some selling in base metals. Copper futures on the MCX is currently down over 3%, while aluminum plunged 1.25%.

Hindalco Industries Limited (NS: HALC ) which is a INR 92,337 crores big metal company and a producer of copper and aluminum is also losing steam in this weak market. The stock has been consolidating in a range for the last few weeks. This consolidation range developed after the stock started to recover from the lows which is depicting a sign of worry.

Image Description: Daily chart of Hindalco 

Image Source: Investing.com

Generally, a rally followed by a consolidation phase represents that profit booking is going on by long holders. Because the supply of the security is more or less being matched by the demand by latecomers, the stock virtually moves in a sideways trend. This phase is very important as this tug of war decides where the stock could head after it breaks out of the range. 

If the range gets breached on the lower side, the whole consolidation could be termed as a ‘distribution phase’. A breakdown from this range generally warns of a trend reversal, the proof of which is the breakdown itself which is simply the result of supply overpowering demand.

Today, Hindalco shares tanked comfortably below this support of INR 410 to the last traded price of INR 398 and are also looking to close below it.  As the breakdown would also be confirmed on the weekly chart as today is Friday, investors in the company should get cautious. The level to which the stock could fall is somewhere around INR 370 - INR 375 in the near future. A weakness in the broader markets and the commodity markets would further work as a catalyst for the downward trend in Hindalco shares.

In case a retracement comes to the level of INR 410 which has now become a strong resistance, conservative traders might think of taking an action over there.

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  • kadar supermarket @kadar supermarket
    this self made expert wants you to sell your metal shares so that he can buy them in accumulation phase ...on Monday every stock including metals will be in green on mini rally ..mark my words
    Like 2
    • Basavaraj Mayi @Basavaraj Mayi
      😀
      Like 0
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  • PAVAN KUMAR @PAVAN KUMAR
    wat about Jindal steel and power
    Like 0
  • PAVAN KUMAR @PAVAN KUMAR
    wat about Jindal steel and power
    Like 0
  • Md Kasim Kureshi @Md Kasim Kureshi
    sir why not u gives your thoughts on nifty
    Like 0
  • Ria Singh @Ria Singh
    thanks
    Like 1

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