Top sector to watch: Metals

On Monday, the index has soared nearly 4% and is the top performer among the sectoral indices.

The Metal sector has been the top trending sector in recent times and has given big support to Nifty in times of turmoil. The Metal index has gained nearly 10% in just two days.

Last Thursday, the index slipped below its 200-DMA but soon recovered sharply from lower levels. The index has made a double bottom-like pattern on the technical chart, with the support level at around 5300-5400. Since then, the stocks belonging to the Metal sectors have experienced huge buying interest. On Monday, the index has soared nearly 4% and is the top performer among the sectoral indices. With such strong price action, the index has surged above all its key short term and long term moving averages. Moreover, the top three gainers among the Nifty stocks belong to the Metals, which are Tata Steel, JSW Steel and Hindalco.

The technical parameters show improved strength in the index. The 14-period daily RSI has jumped sharply above 50, indicating a strong strength in the index. The lagging indicator MACD line is about to give a bullish crossover and is placed near its signal line. The Elder Impulse System points towards the bullish sentiment of the index. Moreover, the index has taken out an important level of 61.8% Fibonacci retracement level, which happens to be a strong resistance zone. Overall, the picture looks bullish and is expected to continue for some more time.

On a YTD basis, the index has outperformed the benchmark index Nifty by a huge margin. It has generated about 6% returns as against negative 5% of Nifty. Traders have been relying on the sector in the past few days, and thus, the sector has protected their wealth. Considering the ongoing bullishness, the index has the potential to test the resistance levels of 6000 and beyond in the short to medium term.

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