Stocks: A key gauge indicates extreme bearishness


Mumbai: trend indicator are pointing to an extreme slowdown in store Markets after the recent selloff Out of the country’s 500 top stocks on the BSE, 86% are trading below their 200-day moving average (DMA) – used by market participants to determine the long-term trend in a stock or index. A solution to go when a stock or index trading Below its 200-DMA, it is said to be in a bearish trend and vice versa, but extreme readings are also seen as an indicator of the opposite.

Solara Active out of BSE-500 Index,

, , , Housing, , , , , and are 48-68% off their 200-DMA. This means that pessimism is high in these stocks. Financial sector stocks are furthest from their 200-DMA.

Analysts Said that when 86 percent of stocks are off their 200-DMA, it is considered a contrarian indicator.


Rohit Srivastava, Founder, said, “When almost 90% of the stocks are below the 200-DMA, readings like this usually mean that a rebound could happen.” “From a one to three week outlook, we are expecting a rebound where Nifty may go up to 16,000 or more. If it sustains then 16,900 is possible.”

But, in one bear market As with the current one, the opposite sign may not work. With overseas selling of Indian stocks continuing amid a weak rupee, analysts said the market’s recovery is short-lived due to selling at higher levels.

“I am expecting this rally to end sooner or later after rising to 15,600-15,700,” said Sriram Velayadhan, vice-president-alternative research, IIFL.

“FPI shorts have close to 80% percentage in long and short index futures open interest of FPIs and they know what the risk is in the current environment.”

He said that crossing 16,000 would be important for Nifty to gain strength.

“Most of the indicators point to a state of caution. By the time 16,900 are cleared, we will not be out of the woods,” Velayudhan said.


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