SAIL is in limelight for the breakout of the Inverse Head & Shoulder pattern and falling channel, so I thought to take a look. It looks like SAIL is getting ready to resume its uptrend.
• There’s an Inverse Head and shoulder pattern formation with the neckline exactly at a Strong Support & Resistance level. • We can draw two falling channels on the price chart (Marked as Falling channels 1 & 2 on the chart).
Price has broken above the inverse head and shoulder pattern, falling channel 1 and Strong resistance line. A breakout above the other falling channel is pending.
For the uptrend to resume and to confirm that the correction has ended, the price has to just sustain the breakout and stay above the Strong resistance at 105. After which sail can go a long way.
Possibilities of breakout failure can not be ruled out, no matter how favorable the market conditions look. Sometimes the scenarios change instantly.
If SAIL starts its up move, it can go way above its previous ATH.
Reason?
• China produces around half of global steel and it’s dragging down the output by reducing production. Other large steel-producing nations including India saw an uptick in production and exports. • Price hikes are most likely to be announced as coking coal prices are at elevated levels and expected to be there for a long time. • Indian steel producers will have a better opportunity to increase exports due to the absence of Russia & Ukraine.
China increasing production is the biggest risk. But for the current scenarios, Indian steel manufacturers are in a sweet spot.
SAIL is more than just a swing trade opportunity. I'm betting on the steel industry to grow all together and not just one stock.
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Comment
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This is a perfect example of confirmation of the breakout I talk about in my publications.
4th April - Breakout Price broke out above the Head & Shoulder pattern, strong resistance & Falling channel 1.
5th April - Indecision A small red candle was formed which sustained above the breakout point. This small red candle is important.
Let me tell you how I see this candle:
Notice that the volume for this small candle was above average and almost near to the volume traded during the breakout candle. This indicates that even though the buyers and sellers were active, they were indecisive. Neither the bulls nor the bears took control, But the price sustained above the breakout point (strong resistance which was broken). Bears failed to drag down the prices below the breakout point.
6th April – Confirmation Bulls take control and price moves above the small red candle, volumes are shooting up and the price has broken above the falling channel 2. This confirms that the breakout above multiple patterns and strong resistance is sustained and the price is continuing its up move. As expected the price hovered around 109 for a while which is our buy level stated in previous update.
This is the day I place my buy order. I will stick to my stoploss below the breakout candle. If it gets triggered, I will look for the next opportunity. If the price moves in the expected direction, I will trail my SL. My target is open as I see the whole steel sector in a good position in near future.
Great in depth analysis. A good read. wanted to ask if there are any related commodities to steel that you are viewing as well?
Sai_Kumar
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@sankalp_ray, Thanks. Russia and Ukraine are major suppliers of steel and raw materials. both the countries collectively contribute to roughly 10% of the global steel trade. If we talk specifically about the commodities related to steel, I'd say iron ore and coking coal. Coal and other input materials prices have soared and will stay at elevated levels due to the demand & supply bottleneck.
smalik246
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Very well explained....entire steel sector will gain and each company will reap benefits according to its strength in terms of its work area( like Tata Steel in Europe), exports and availability of key raw materials at competitive prices.
nileshkum
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perfect explanation. technical analysis supported by fundamental businesses views.
entered today on breakout of H&S but in last hr selling happened. let's hope it sustains above 105.
Sai_Kumar
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@shishirchaurasiya, I prefer waiting for the price to struggle a little above the breakout point, and then the next strong candle is where I enter the trade. i lose many trades in this process but this also increases my win rate. I'm positive that the price will sustain the breakout.
Sai_Kumar
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@shishirchaurasiya, you've already taken a position. I'd suggest you keep a strict stop loss.