Bajaj Finance, UPL, IndusInd among overbought stocks as Nifty bounces back

Technically, a RSI reading above 70 is considered overbought for the stock, which could mean the stock may consolidate or correct in the near-term; but not necessarily fall.

The NSE Nifty 50 index has gained 4 per cent from its low of 22,787 in the last eight trading sessions. On Wednesday, the Nifty 50 index quoted on a flat note around 23,750 levels in a choppy trade. Meanwhile, the broader Nifty 500 index has rallied 5.3 per cent from its low of 20,758, and was seen quoting around 20,820 levels in today's session.  Technically, the Nifty 50 index was seen favourably placed above its short-term moving average and the super trend line on the daily scale. On the other hand, the Nifty 500 index was seen testing resistance around its super trend line on the daily scale at 23,820, a close above the same will strengthen the trend for the broader index.  The daily chart shows that the Nifty 500 index is likely to trade with a favourable bias as long as the index holds above 21,475. On the upside, the index can potentially rally to 22,700 levels, with interim resistance seen at 22,000 and 22,250.  Among individual stocks in the broader market, 65 out of the Nifty 500 stocks have gained over 10 per cent in the last eight days; with 5 surging more than 20 per cent. Beaten down Kalyan Jewellers tops the gainers chart with a 29 per cent gain. Syrma SGS Technology, Inox Wind, Westlife Foodworld, Phoenix Mills, DOMS Industries, Cholamandalam Investment and Finance Company, TVS Motor, Aptus Value Housing Finance, Aditya Birla Real Estate and UPL were the other major gainers - up over 18 per cent each.    Amid this recent pullback, select stocks are now seen trading in overbought territory on the basis of the RSI indicator. The 14-day RSI (Relative Strength Index) indicator is plotted on a scale of 0 - 100; a reading above 70 implies an overbought position; whereas, a reading below 30 implies oversold zone.  Just being overbought or oversold does not necessarily mean a likely change in director. The underlying index or stock can also consolidate or trade sideways for the RSI indicator to cool-down. However, analysts do caution on venturing into stocks that are overbought, as they may tend to fall sharper in case of adverse market reaction.    UPL and Bajaj Finance with a 14-day RSI reading above 78 are two leading stocks in the overbought zone among the Nifty 500. That apart, SRF, Maruti Suzuki, SBI Cards, IndusInd Bank and Navin Fluorine were some of the other prominent overbought stocks on the bourses.  Meanwhile, despite the broader market recovery select stocks continue to languish in oversold territory technically, meaning with a RSI reading below 30. These stocks are - JK Tyres, Rajesh Exports, Pfizer, Kaynes Technology, HEG, Carborundum Universal, Whirlpool of India, GR Infra Projects, BASF, Apar Industries and Bosch. 

overbought oversold stocks