Limited downside seen in markets as over half of Nifty500 stks hold 200-DMA

Domestic benchmark indices have hit fresh yearly highs in the previous session, demonstrating immense bullishness of the current breadth. The BSE Sensex reached 61,797 and Nifty 50 scaled 18,267, both conquering their respective previous highs. 

Following a sharp reversal at the end of the April series, the BSE Sensex and Nifty 50 took a breather near to their respective the 200-day moving average (DMA) before offering the next leg of upside few sessions ago. 

Now, when the indices have reached fresh yearly highs, stocks crossing or hovering near their 200-DMA shall see added upward momentum, with price action beginning to display eye-catching up move. 

Trading fraternity regards the 200-DMA as the most decisive indicator in the stock market. Stock rising or settle over the 200-DMA are deemed to possess strength and required momentum to rise further. 

At the moment, roughly 282 stocks are trading over the 200-DMA, while 225 stocks have yet to declare their positive appearance. This is formally viewed as the market breadth, which seems to be in favour of bulls.

Technically, trading or building a bias against the trend has not been fruitful in the past. Trend is a friend, and moving along the trend assists in building a risks-free portfolio.

Presently, over 50 per cent of Nifty 500 stocks have surpassed or trade over the 200-DMA and once this ratio improves, it will indicate a bullish breadth that seems to overweigh any major sell-off.

Once the market breadth advances in the bull’s tent, the trigger may push numerous stocks trading over the 200-DMA in more uncharted territories. Few may even begin to reveal “Higher High, Higher Low” formation, a clear indication of market participants’ exhibiting interest in the current rally.

Furthermore, over half of Nifty small cap stocks i.e 57 stocks have crossed the 200-DMA suggesting robust sentiment for higher returns. Also, nearly 61 stocks in Nifty Mid cap index trade over the 200-DMA, revealing clear upward momentum.

Few small cap stocks indicating a resilient chart structures include Amara Raja Batteries, IDBI Bank, IDFC, Mahanagar Gas, PNB Housing Finance, Raymond and Rail Vikas Nigam. 

Mid cap stocks include Aurobindo Pharma, Balkrishna Industries, CG Power and Industrial Solutions, Federal Bank, IDFC First Bank, Jindal Steel & Power, Navin Fluorine International, Petronet LNG, PB Fintech, REC, TVS Motor Company and Zydus Lifesciences. 

Source: spidersoftware

source:spidersoftware