Stock Recommendation: Buy Tata Steel

update : (15 Dec 08) Bought Tata Steel at 204 and sold at 225.5.
Net Profit: +10.5% in 6 days

For a long time I have waited for the current economic crisis to unfold. Have stopped trading, even stopped my SIP. Not that I think the crisis is really over, but with the current government economic package there should at least be short term respite to companies. Now, i think it is a good opportunity for investing in Tata Steel, with a time-frame of not more than one month.

Current price of Tata Steel is Rs. 196/-.

Lets look at the Price Volume chart of Tata Steel and moving averages from Icharts

There you see. two clear bullish indicators : Rise in volume and price rising above the 20 day moving average (the red line).

However, there are risks involved. The current economic crisis is not over and bad news from US about housing and employment has never stopped pouring in. Also, Tata steel is still burdened by debt arising from its Corus acquisition, and it is quite possible that if the current crisis worsens, the company will face a Liquidity crunch. It has already cut output and I would not say the outlook for the steel sector has suddenly dramatically improved. So please, keep a stop loss and respect it. Moreover book your profit once the stock rises about 10-15%.

Dec 9, 2008

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