40% of Nifty IT stocks oversold, Tech Mahindra & LTTS looks ready for bounce back: Anand James

economictimes.indiatimes.com:

40% stocks in Nifty IT index have moved into the oversold region and among them Tech Mahindra and LTTS looks to be gearing up for a bounce back, says Anand James, Chief Market Strategist at Geojit Financial Services.

“Among the NSE500 stocks, 10% stocks are oversold. Interesting fact is that Chemical stocks have corrected significantly and around 70% have either entered the oversold region or close to the oversold region,” he says. Edited excerpts:


After six days of non-stop decline that ended with October series expiry, was Friday's upside expected? Nifty showed strong support at 200-DMA. What are the targets for the new series?
Both the non stop decline as well as the turn on Friday could be explained by 200 DMA which remained the target and thereby a point for reversal, after the penetration of 19500 triggered panic selling. Friday also saw the November derivative series becoming active, also aiding a bounce back that has now retraced about 23% of the fall. This retracement could stretch as far as 19150 as well, while momentum could even push the recovery move to 19420 which is from where bears could mount fresh challenges in the days ahead. Alternatively, inability to hold above 19050 or a direct pull back below 18900 would also ensure that the 200 DMA at 18600 is tested. Breach of the same would bring the worst case scenarios into the picture, with 17000 as the likely objective, but this is least favoured at the moment.

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