Rohit Srivastava, Founder & Market Strategist, Indiacharts.com, says For the midcap index, the reading was at around 89 on the day before’s close. Yesterday's closing, it has come back to 63 and right now live, it is trading at 60. For the small cap index, the similar thing would be the day before, it would have been at 87.98. After yesterday's close, it is down to 59 and right now also it is at around 59. As mid and smallcap indices are coming very close to the 20-day moving average, we will expect them to get support and bounce back over the next couple of days.”
Yesterday's fall and today's follow-up activity, how do you read it?
This is part of a minor correction in what is a bigger trend in favour of mid and smallcaps. We have to view it from both the short term time horizon and the long term time horizon. In the short term, indicators like the RSI is hitting overbought but what that usually means is we get a one day knee-jerk reaction, maximum two days and then that is it, because then it takes only two days for the RSI to come off from something like 85-87 which is an extremely overbought state to something like a 65-66 or even 60 which we have already seen yesterday and are further seeing today.
Both the mid and smallcap indices now are coming very close to the 20-day moving average and that is more significant because that is where we will expect them to get support and bounce back over the next couple of days.
For example, the Nifty small cap index 20-day average