These 20 small-cap stocks appear overbought on the charts. Trade cautiously

The overbought condition on any technical parameter hints at the possibility of a correction going ahead. Hence, It is advisable to book profit and buy again at lower levels, if the technical and fundamentals of the company remain robust. 

Despite being in the overbought terrain, there could be a few stocks that continue to hold positive strength if the fundamentals of the company are robust and there is a genuine demand for its stock as indicated by the trading volume. Typically, these stocks manage to absorb all the selling pressure without any major correction. Such stocks are expected to breakout on higher levels with market participants taking a greater interest. As a result, they can even cross their previous 52-week / monthly / yearly and all-time high levels.

In addition, there are stocks which have built active scenario on the volume or could be on other aspects such as chart patterns, support-resistance, moving averages, etc

A quick run on the data suggests that there are 20 stocks in Nifty Smallcap 100 Free index that are trading in the overbought zone of Relative Strength Index (RSI), Stochastic and the Money Flow Index (MFI). All these indicators mainly identify price actions based on their relevant signals. RSI studies the strength of the stock, the Stochastic compares price position and MFI analyses the volume along with the stock price.

Out of these 20 counters, only 4 stocks are showing weakness in the overbought condition and can correct in the days ahead. This list includes CSB Bank Limited, TV18 Broadcast Limited, Kaveri Seed Company Limited and Shilpa Medicare Limited.

Here's is the lists of bullish stocks in the overbought territory:-

source: spidersoftwareindia.com

 


































Of the lot, here are trading strategies for the ones that look the weakest.

CSB Bank Limited (CSBBANK)
 
Likely target: Rs 280 (after breaching Rs 300)

Downside potential: 6.50%

Both the indicators, RSI and MFI are showing weakness in the overbought category. The counter has been unable to cross the Rs 340 mark. On the other hand, a breach below Rs 300 may result in a decline towards Rs 280 mark. The overall trend is indidcating selling pressure at higher levels.  CLICK HERE FOR THE CHART
 
TV18 Broadcast Limited (TV18BRDCST)

Likely target: Rs 36 (below Rs 40 mark)

Downside potential: 10%

A clear negative divergence of RSI shows weakness in the overbought category. Although, the has counter managed to cross the resistance of Rs 40, the follow-up buying is not reflecting any more positivity. The counter may either stay sideways, or fall below Rs 40, which may see the counter dip to Rs 36 levels. CLICK HERE FOR THE CHART

Kaveri Seed Company Ltd (KSCL)

Likely target: Rs 720 and Rs 700

Downside potential: 5.26% - 7.89%

Despite good volumes, the counter has been unable to conquer the resistance of Rs 800, as per the MFI indicator. The stock is gradually losing momentum and may decline towards Rs 720 and then to Rs 700. It has resistance at Rs 775, Rs 785 and Rs 800 levels. CLICK HERE FOR THE CHART

Shilpa Medicare Limited (SHILPAMED)

Likely target: Rs 500 and Rs 480

Downside potential: 5% - 8.75%

All the three indicators mentioned above have seen the stock lose ground. The Stochastic has slipped, reflecting greater degree of selling pressure in the coming sessions. Unless the counter does not cross Rs 550 mark, the Shilpa Medicare may see Rs 500 and Rs 480 levels in the days ahead, as per the daily chart. CLICK HERE FOR THE CHART