Technical Analysis of Indian Equities by Nooresh

Dow Jones & Nifty Technical View

Dow Jones Technical View

Dow Jones Oversold

  • RSI and Dow Jones Daily Chart with price labels.
  • Dotted Green lines show what happened when Dow Jones RSI dropped to 30 or lower. 2-3 close lines are positive divergences.
  • In 2018 we bottomed out a few times around 30 RSI and had 2-3 bounces from the trendline ( circled)
  • The crack in end of 2018 was deep after the breakdown and even took the previous low but bounce was sharp.
  • Since then couple of bottoms made around 30 RSI
  • We are back at 30 RSI and a trendline support at 26900-27300.
  • Last 4 major tops of Dow Jones – 26600/26951/27400/27277 also should act as support.
  • There are two possibilities we look out for
  • 1) A bounce and bottoming out around 26900-27300 ( +- 250 points )
  • 2) A temporary bounce and then move all the way to 25000-25500.
  • Would go with option 1 and then re-evaluate in coming 2 weeks.

Nifty Technical View

Nifty

  • Nifty has formed a top around the upper end of the channel and resistance.
  • Last major resistance with 3 tops was 11600 which got taken out and then retested around budget.
  • Nifty was at 30 RSI at budget and we are still not oversold.
  • Dotted lines show previous bottoms below 30 RSI. 2-3 dotted lines together are positive divergences. One we picked in September 2019 –( Nifty at 10700–Divergence – Global Indices Up India Down !! )
  •  
  • 11600-11700 remains an important support point to watchout over the next few days. May even look for a buy at 11600-11650 with a stop at 11500-11550.
  • The other case is a dip to 11000-11200 – lower end of channel and previous breakout. This I think would be a good entry point for the Index as well as stocks with a medium to long term view.

Conclusion –

A strict stoploss trade around 11600-11650 but a good opportunity if we do drop down to 11000-11200.

The broader indices in last two days have managed to hold on to the lows of 18th Feb.Such relative strength indicates stock specific opportunities to start again as soon as benchmark indices find a bottom. If we do crack below 11600 then we can get broader market correction and stock specific dip buying opportunities to spring up. So stock specific would prefer to act after a reversal from 11600-11650 or at 11000-11200. So next few days maybe an index trade or just wait and watch for price action. Some times its ok to do nothing.

Related Reading on RSI Divergences and previous bottoms

1) Youtube Video - RSI oversold strategy - https://www.youtube.com/watch?v=p6WxDxOKGkY 

2) Nifty at 10700 - Nifty at 10700–Divergence – Global Indices Up India Down !!

 

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Article by Nooresh Merani

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