Stocks below the 200-day moving average (DMA) reached 89% for BSE. In March 2008, when Nifty hit bottom at close, 98% of inventory was below their respective 200 DMA. In December 2011 and September 2001, these figures were 91% and 94% respectively.
The relative strength index (RSI) on the monthly charts has reached the oversold area for the first time in Sensex. On the record of 12,430 records recorded in January 2020, the Nifty recorded a decrease of 39% in just 45 sessions. Daily and weekly RSI are also in oversold territory. This configuration does not favor shortening compared to current levels because the chances of withdrawal are very high.
Nifty has never been able to close above its 5-day EMA since February 19, 2020. The 5-day EMA is currently placed at 8,240 odd levels. Any close above this level would give confidence to initiate new long for short term gains. Above 8240, Nifty could evolve towards 8883.
Support for the Nifty increased to 7,511, below which it could slide to 7,341, which turns out to be a 50% retracement of the entire rally, from 2,252 (in October 2008) to 12,430 (highest historic reached in January 2020). .
Ideas for action
BUY HINDUNILIVER (2005): | Target: Rs. 1900 | Stop-loss: Rs 2150
The share price returned to a level above its 200-DMA with higher volumes. It left the oversold area on the daily charts. Last week, the Nifty FMCG index itself closed with a bullish candlestick reversal pattern on the weekly charts.
BUY INFOSYS (593) | Target: Rs. 660 | Stop-loss: Rs 560
The stock price closed above its 5-day EMA with higher volumes. The rise of the dollar against the rupee could help the IT index to outperform in the coming days. The RSI on the daily chart has left the oversold area. On March 24, 2020, the open and low inventory remained the same and closed with a gain of more than 10% with increasing volumes.
Disclaimer: The author is a technical analyst at HDFC Securities and may have positions in one or all of the stocks mentioned above. The opinions expressed are personal.