Metal index rebounds, Vedanta breaches multi-year high

Robust performance from metal majors uplifted the benchmark indices to close at all-time high with nearly a per cent gain from the previous close. Nifty Metal index rose as much as 4 per cent majorly driven by 5.2 per cent gains in Vedanta, which holds 20.2 per cent in the index.

Barring APL Apollo, Welspun Corp and Hindustan Copper, all other index stocks closed in green with JSPL at the forefront with 10 per cent plus gains. The expected abolishment of import duty on import of coking coal and justifiable results from the index metal companies led to this exuberant move in the index.

Technically, the index had given Falling Wedge pattern breakout on December 18 and thereby gave almost an uninterrupted rally of at least 16 per cent till January 15. The index formed Shooting Star pattern on that day and thereby tumbled up to 38.2 per cent retracement of the prior rally and witnessed a sharp bounce back on Tuesday. The surge was supported by volume rise after two days fall and 14-period RSI crossover at 62 levels which suggests momentum, going forward.

Vedanta, metal major too gave its multi-year breakout after January 2011 at 346.50. The stock gave a kind of Cup and Handle pattern breakout on daily charts though on the upside. Hence, if the stock sustains above Rs. 346.50 on closing basis, the stock may see more than a 35-40 points upside in the sessions to come.