Short-term moving averages` sharp drop reinforces bearish sentiment - Tradebulls Securities Pvt Ltd
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Yesterday’s price action showcased a potential trend reversal through a ‘Homing Pigeon’ candlestick pattern. However, a decisive close above the 5 DEMA level of 22,360 is essential to confirm this reversal. The index has been trading below its 5 DEMA for 14 consecutive sessions, accompanied by oversold readings on trend strength indicators. The daily RSI has officially entered the oversold zone, while the ADX stabilizing below 40 indicates waning momentum in the ongoing downtrend. The sharp descent of short-term moving averages reinforces the prevailing bearish sentiment. However, the oversold conditions could trigger a technical rebound in the near term. Immediate resistance is seen at 22,300, followed by 22,500 — a critical zone coinciding with the Run-Away Gap. If an 'Exhaustion Gap' emerges, it could signal the formation of a durable bottom in the corrective phase. A sustained pullback would offer an early indication to consider fresh portfolio allocations, potentially paving the way for a renewed bull trend. Traders are advised to stay nimble and await strong reversal signals before initiating long positions. In case of a rebound, a SELL on RISE strategy should be avoided, as the market may be on the verge of a turnaround.
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