INSUBCONTINENT EXCLUSIVE:
The domestic equity markets witnessed an impulsive correction in September
As a result, nearly 60 per cent of the Nifty50 stocks breach their respective support at the 200-day moving average (DMA)
As of September 28, 2018, blue chips such as Bajaj Auto, Bharti Airtel, Coal India, Hindustan Petroleum Corporation, YES Bank, UPL, Tata
Steel, Eicher Motors, Grasim Industries, Hero MotoCorp, Maruti Suzuki, Zee Entertainment and Kotak Mahindra Bank were trading below their
The 200-DMA is most commonly used indicator among traders and investors as it typically represents one working year
The average is perceived to be the dividing line between a stock that is technically healthy and one that is not
Furthermore, the percentage of stocks above their 200-day moving averages helps determine the overall health of the market.
However, when a
stock dips below its 200-DMA, it in a way gets oversold and shows signs of recovery and a possible technical pullback
With regard to largecaps that are trading on, near or below their 200-DMAs, many -- but not all -- have shown signs of bottoming out
tool should be given due importance while making buy and sell decisions in technical analysis and the 200-DMA is not an exception to that
practically true because often we find stocks or indices breaching 200-day moving averages for a brief period and then resuming their
resumed its uptrend from the low of Rs 8,255 to move all the way to Rs 9,929
A similar thing happened with HDFC Bank in December 2016
Along with this average, it is important to consider the larger trend and direction of the market
Unless the entire market itself is reversing, we should not avoid such largecaps
Ruchit Jain, Technical Analyst at Angel Broking, said largecaps that have breached their 200 DMAs in this correction are likely to continue
A prudent strategy for traders should be to avoid bottom fishing at current juncture
In such times, weekly charts should be given more weightage and only when a reversal pattern is formed on the higher time frame charts,
He said this market could correct further in the near term and hence, traders should wait on the sidelines and be vigilant on market
moves.
Other analysts also said while over half of the largecaps are trading below their 200-DMAs, only a few of them look
attractive.
Mohammad said one can look at the HDFC twins and Kotak Mahindra Bank at present, as they appear to have formed a short-term base
after breaching their 200 DMAs
from pharma, infrastructure, IT, metals and energy sectors qualify for bargain hunting at this moment
Mahindra, Tata Consultancy Services, Infosys and HCL Technologies are now trading above their 200 DMAs
Reliance Industries (RIL) and ICICI Bank were also trading above their 200 DMAs as of September 28, 2018.
