Nifty enters overbought territory; RSI at 80 – highest level since July 2023
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Except pharma, all other sectoral indices are trading in the green with PSU Bank, capital goods and oil & gas indices up 3 percent each, while bank, capital goods and metal up 1-2 percent each.
Bullish momentum gripped the Indian stock market on December 4, propelling benchmark indices to unprecedented levels. Nifty surged to touch record highs up 300 points. Nifty is now in overbought territory with Relative Strength Index (RSI) at 80 – highest level since July 2023.
The NSE Nifty 50 and BSE Sensex achieved fresh all-time highs on December 4, fuelled by investor enthusiasm over the BJP’s significant victory in three states. The 30-share Sensex soared over 1,000 points to 68,588, while the 50-stock Nifty surged over 300 points to 20,603.
An RSI reading above 70 indicates an overbought condition.
“Nifty has given a fresh breakout above 20,200 levels with an unfilled gap on the daily charts and entered uncharted territory, with RSI at 70-72 zones. Historically, in a trending bullish market, RSI tends to be in the overbought zone around 70-80, and the index keeps moving higher amid short covering and strength in the underlying stocks. Therefore, RSI is expected to be in the overbought zone for the next few days, and bullish sentiment is likely to continue, propelling the benchmark index towards the 20,800-20,900 mark in the coming trades,” stated Arun Mantri, Founder of Mantri Finmart.
As per Kapil Shah, Technical Analyst at Emkay Global, “It’s interesting to note that the index has almost gone up by 10 percent in just 27 trading sessions. The RSI reading is currently at 80 level which is not the highest. In the past, the RSI reading had peaked around 83 level. History has shown that Nifty has closed on a positive note for 74 percent of the time in December with an average gain of 3.3 percent over the past 27 years. Overall, the trend remains positive with potential upside up to 21000. However, we cannot rule out the possibility of a mild correction in terms of price or time. Dips in the index may provide a good opportunity to buy.”
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