After the recent double top in the $BSE, preceded by a massive run from 8k to 21k, it’s no surprise that the Bombay Markets took a well deserved rest. I have reason to believe that this market has bottomed and is about to turn around. Now whether we’re going to make another run at the recent highs, that can’t be known until we see what the shape of the snapback rally looks like, however I do see an opportunity here, especially with the long term potential of this region.
I’ll start with the longer view on the weekly chart and work my way down to smaller time-frames. Ever since this rally has started, the RSI (relative strength index) has traded between the 50 -80 level, never staying below 50 for very long. My work with this indicator tells me that when we correct to the 40 level (or slightly below), and stay above the 30 level, the chances are high that a stock or index will soon bounce. When you combine that with the many areas of support found on this long term chart, I really like this setup as a longer term trade.