Chart Check: Down 30% from highs! This insurer is showing signs of bullish reversal

Synopsis

The Relative Strength Index or RSI is mid-range and is near oversold levels. RSI is 37.4, RSI below 30 is considered oversold and above 70 overbought, Trendlyne data showed.The Money Flow Index (MFI) uses price and volume data for identifying overbought or oversold signals is at 28.4. MFI below 30 is considered oversold. This implies that stock may rebound, added the report.

Agencies

might be down by about 30 per cent from its September 2021 highs, but the stock is showing early signs of trend reversal which augurs well for the bulls.

The stock with a market capitalisation of more than Rs 56,000 crore hit a 52-week high of Rs 1,674 on 22 September 2021, but it failed to hold on to the momentum. The stock closed at Rs 1,144 which translates into a downside of over 31 per cent.

Technical indicators suggest that a rebound could be in the offing after the recent selloff. Traders can look at adding longs with a strict stop loss placed below Rs 1,100, suggest experts.

Shares of ICICI Lombard has been making lower high and lower low formation since September 2021. It formed a ‘Death Cross’ on the daily charts in December and since then the stock has been under pressure.

‘Death Crossover’ signifies when the short-term 50-DMA crossed below its long-term 200-DMA which is a sign of weakness.

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The 50-DMA is now acting as a stiff resistance. The stock retested this short-term moving average twice in May 2022 but failed to close above the same.

The Relative Strength Index or RSI is mid-range and is near oversold levels. RSI is 37.4, RSI below 30 is considered oversold and above 70 overbought, Trendlyne data showed.

The Money Flow Index (MFI) uses price and volume data for identifying overbought or oversold signals is at 28.4. MFI below 30 is considered oversold. This implies that stock may rebound, added the report.

ICICIGI_2022-06-14_15-38-13 (1)Agencies

On the price front, the stock is trading well below the crucial 10,20,50,100, and 200-DMA while it is trading above the 5-DMA which is placed at Rs 1122.

The stock price corrected from 1400 levels without any significant pullback as it has fallen below Rs 1,100 recently.

“On the daily chart, the stock has fallen with lower top lower bottom formation. Besides, the price has fallen significantly below 200DMA. On the weekly chart, it slipped below the previous swing low, indicating a weakness,” Rupak De, Senior Technical Analyst at

, said.

“However, the stock has moved above its recent consolidation on the daily chart, which indicates an early indication of bullish reversal. The daily RSI is in bullish crossover and rising,” he said.

In addition, a positive divergence is visible in the daily RSI, which suggests bullish reversal of the price momentum.

“Over the short to medium term the price may recover towards the Rs 1,280-1,300 which is a decent 14 per cent rally on the higher end. On the lower end, support is visible at Rs 1,100 on closing basis. A closing below Rs 1,100 may trigger resumption of selling pressure,” recommends De.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

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