RSI Bouncing From Extreme Oversold Condition

For now, be with a positive bias as long as it trades above the prior session’s low. If the Nifty is able to close above 22,391 points, it will be positive, can test the 20DMA of 22,858 sooner or later. This retracement is needed to come out of the oversold condition

The equity indices recovered from the extreme oversold condition and the broader market has outperformed. NSE Nifty gained by 254.65 points or 1.15 per cent and closed at 22,337.30 points. All the sectoral indices were positive, as they gained 0.10 per cent to 4.04 per cent. The Nifty Metal index is the top gainer with 4.04 per cent. PSE, Media, CPSE, and PSU Bank indices gained over three per cent. The Smallcap, Microcap, Energy, Commodities, and Auto indices went up by over 2.5 per cent. The India VIX is down by just 1.16 per cent to 13.67. The Market breadth is extremely positive as 2,472 advances, and 360 declines. About 121 stocks hit a new 52-week low, and 269 stocks traded in the upper circuit. BSE, Coforge, HDFC Bank, Adani Green and Infosys were the top trading counters, in terms of value.

As we suspected, the Nifty closed positive after a 10-day losing streak. It closed above the two-day high and formed a strong bullish candle, where the open is the low. It recovered over 430 points or 1.96 per cent, from the previous day’s low. It tested the 8EMA resistance. The RSI is bouncing from the extreme oversold condition. The MACD line is also starting to turn upside down. Now, as long as it trades above the prior session’s low, be with a positive bias. It closed near the session’s high, which is a positive factor. The volumes are slightly higher than the previous day and recorded above-average. Importantly, the broader market indices, Nifty 500, Midcap, Smallcap, and Microcap indices gained over two per cent. It shows that the selling pressure was exhausted, as we suspected earlier. The market breadth is also extremely positive. If the Nifty is able to close above 22391, it will be positive and it can test the 20DMA of 22858 sooner or later. This retracement is needed to come out of the oversold condition. For now, avoid taking short positions. We may see positive bias for the next 5 to 8 days.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)