KRBL, Prestige Estates: Stocks exiting oversold zone; Ready for pullback?

Stocks like BSE, KRBL, Prestige Estates, Sharda Cropchem and Sumitomo Chemical are seen exiting oversold zone and can potentially rally up to 16 per cent in the ensuing pullback, suggest daily charts.

Stocks across-the-board have witnessed a significant correction in recent trading sessions amid valuation worries, and uncertainty over the timing of US interest rate cuts.

The NSE benchmark Nifty 50 has declined 3 per cent from its recent high, while the broader indices - the Nifty MidCap 150 and SmallCap 250 have shed 7.4 per cent and 10.1 per cent, respectively.

However, stocks tend to pullback after a sharp adverse reaction, wherein the stocks get oversold. Among the key momentum oscillators, the 14-day RSI (Relative Strength Index) is one such key technical indicator that suggests if the stock is overbought or oversold.

A reading above 70 levels on the RSI suggests that the stock is overbought, whereas, a reading below 30 indicates that the stock is oversold. More importantly, retrieval from either overbought or oversold levels acts as an early indicator of likely pullback in the underlying price.

As such, here are five stocks that are seen exiting oversold zones on Wednesday, and can provide up to 16 per cent pullback in the near-term.

BSE

Current Price: Rs 2,019

Potential pullback: 12.4%

Support: Rs 1,956

The 14-day RSI of BSE hit the oversold level of 30 twice in recent trading sessions, and has now shown a marginal positive divergence. Further, among other key momentum oscillators, the MACD (Moving Average Convergence-Divergence) too is showing signs of 

some exhaustion in selling.

Going ahead, the recent low of Rs 1,956, can act as near-term support. As other indicators turn favourable, the stock can potentially pullback towards its key moving averages. The 20-, 100- and 50-DMAs (Daily Moving Averages) stand at Rs 2,210, Rs 2,255 and Rs 2,270, respectively. CLICK HERE FOR THE CHART

KRBL

Current Price: Rs 294

Potential pullback: 7.1%

Support: Rs 280

The 14-day RSI of KRBL had hit 17-odd levels last week as the stock slid to a low of Rs 276. However, the RSI is now seen climbing above the 30 levels, and the MACD too is on the verge of turning favourable.

Thus, the current pullback in KRBL may extend, and the stock may test its 20-DMA on the upside at Rs 308 or rally further higher towards the trend line resistance at Rs 315. On the downside, the stock may seek support around Rs 280 levels. CLICK HERE FOR THE CHART

Prestige Estates

Current Price: Rs 1,009

Potential pullback: 16.4%

Support: Rs 994

Not only is the RSI seen rebounding from oversold zone, but also the stock attempting to consolidate above the lower-end of the anticipated trading band. As such the support at Rs 994 is crucial for the stock in the near-term.

Longer the stock trades above Rs 994, higher the prospects of the stock bouncing back towards the 50-DMA at Rs 1,112, above which a spurt towards trend line resistance at Rs 1,174 also seems likely. CLICK HERE FOR THE CHART

Sharda Cropchem

Current Price: Rs 334

Potential pullback: 7.8%

Support: Rs 324

Resistance: Rs 349

Sharda Cropchem has consistently found support below Rs 330 levels in recent trading sessions. The positive divergence on the RSI coupled with presence of near support at Rs 324 in the form of lower-end of the Bollinger Bands on the daily scale augurs well for the stock.

Having said that, the stock face near resistance at Rs 349 - i.e. its 20-DMA a moving average the stock has failed to cross since mid-January. The pullback can gain momentum only if the stock breaks above its 20-DMA, following which a rally to Rs 360 level seems likely. CLICK HERE FOR THE CHART

Sumitomo Chemical

Current Price: Rs 347

Potential pullback: 6.1%

Support: Rs 340

Sumitomo Chemical is likely to test its 20-DMA at Rs 363, or jump slightly higher to Rs 368, wherein lies the trend line resistance in the near-term. The stock has seen a brief recovery from oversold levels, and now after the RSI, the MACD too seems on course to turn favourable. On the downside, the recent lows around Rs 340 may provide cushion for the stock. CLICK HERE FOR THE CHART