Bullish Reversal Potential as Price Actions Show Oversold Condition and Bullish Candlestick Pattern

Oversold condition with bullish Japanese candlestick

The four weeks decline in the price actions has led the 4-hour RSI oscillator into an extremely oversold level of 23.3 level on 6 July 2023 which was the lowest oversold reading since the 15 March 2023 level of 20.9 that coincided with the start of the current medium-term uptrend phase of the Index.

Secondly, the current intraday price actions have also formed an hourly bullish “Hammer” Japanese candlestick pattern which suggests a potential change in sentiment from negative to positive on the short-term horizon.

These two elements (oversold reading in the 4-hour RSI coupled with hourly bullish “Hammer” Japanese candlestick) have taken shape right above the medium-term ascending channel support of 31,530 and the upward-sloping 50-day moving average.

Watch the 31,530 key medium-term pivotal support to maintain a potential bullish reversal with the next resistances coming in at 32,730 and 33,200 (also the 20-day moving average).

However, a break below 31,530 invalidates the bullish tone to expose the next support at 30,720.