Stocks below 200-day moving average (DMA) have reached to 89 per cent in BSE. In March 2008, When Nifty made the bottom on a closing basis, 98 per cent stocks were below their respective 200 DMAs., During December 2011 and September 2001 bottoms, these numbers were 91 per cent and 94 per cent, respectively.
Relative Strength Index (RSI) on the monthly charts has reached oversold zone for the first time ever in the Sensex. From the all-time high of 12,430, registered in January 2020, the Nifty has witnessed a fall of 39 per cent in the span of just 45 sessions. Daily and Weekly RSI, too, are in oversold territory. This setup does not favour going short from the current levels as the chances of pullback 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 that level would give confidence to initiate fresh longs for the short term gains. Above 8,240, Nifty could move towards 8,883.
Support for the Nifty has shifted up to 7,511, below which it could slide to 7,341, which happens to be 50 per cent retracement of the entire rally seen from 2,252 (Oct 2008 Bottom) to 12,430 (all-time high made in January 2020).
BUY HINDUNILIVER (Rs 2005): | Target: Rs 2150 | Stop-loss: Rs 1,900
The stock price has reclaimed a level above its 200-DMA with higher volumes. It has exited the oversold zone on the daily charts. Last week, the Nifty FMCG Index itself closed with a bullish hammer candlestick reversal pattern on the weekly charts.
BUY INFOSYS (Rs 593) | Target: Rs 660 | Stop-loss: Rs 560
The stock price has closed above its 5 day-EMA with higher volumes. Rising dollar against Rupee could help the IT Index to outperform in the coming days. RSI on the daily chart has exited the oversold zone. On March 24, 2020, the stock’s open and low remained same and it closed with a gain of more than 10 per cent with rising volumes.
Disclaimer: The author is a Technical Analyst at HDFC Securities and may have positions in one or all of the above mentioned stocks. Views expressed are personal.