Daily RSI for Nifty is nearing its highest level in decades

Nifty’s daily RSI has given a 3rd highest closing in more than 14 years.

Date RSI
1/9/2021 85.6
15/9/2021 83.86
17/8/2022 83.85
6/9/2021 83.39
3/9/2021 82.61
24/1/2018 82.59
23/1/2018 82.53
31/8/2021 82.49
29/1/2018 82.3
7/9/2021 82.24
16/8/2022 82.22
23/5/2014 82.19
21/9/2010 82.07
9/9/2021 81.87
17/9/2021 81.78
8/9/2021 81.58
14/1/2021 81.45
20/5/2014 81.44
2/9/2021 81.27
14/9/2021 81.2
20/9/2010 81.18

Source : Twitter

These levels were witnessed only during the absolute mad peak run last year and rest of them are either from the NDA win time during 2014 or pre budget move in nifty in 2018.

One thing’s for sure - Seeing nifty’s RSI above 80 consistently is an absolute rarity. How long will it sustain these levels needs to seen.

Is it time to short? In my view, For risk takers - Maybe yes (by taking small SLs and looking for one big reversal trade) , For those who are bullish, It’s maybe time to take some profits off the table. But, definitely these zones are not the places to have FOMO and go all in.

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FIIs, EPFO, retail participation is increasing may be, I don’t know the numbers. And there could be new reasons for such participation too, or there is a strong case even if the reasons are the same.

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Market almost never goes up for more than 3 days when the RSI is at 83-84 in Nifty.

Healthy pullback is always good.

3 days is a very short term when we consider long term to be months. So market may fall a day, goes up or stays put for a few days, then fall again.

I wonder when I see selling in particular sectors on a day, and after a few days those very sectors witnessing buying. Nothing may have changed in those sectors in between, but still they are sold and bought quickly.

So while the daily RSI has gone to above 80, the weekly RSI is still at 60. Of course, I do look at single days when I trade, because one falling day is enough for buying, and one rising day is enough for selling.

It has cooled off to 70 after today’s fall, although still at uncomfortable levels

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Personally I short at 17970 today and covered at 17750. This short was just to hedge my portfolio. And position size was to cover 80 percent of my equity portfolio.
So it was more like a covered call.

Usually I don’t do this for my entire portfolio but I was little uncomfortable at these levels. Just a gut feeling that I would get a small correction at least.

Uncomfortable is subjective even for an investor, and more so for a trader.

If I am investor who want to invest for long term, I want the valuations to come down, the froth to disappear, and I will wait until that happens.

If I am a trader, I will look for opportunities, irrespective of the market level as my concern is only for the short term, even if the valuations wont stay at elevated levels, I don’t mind and in fact I like it as I chase momentum.

And then there is shorting, another opportunity when the market reaches a top and fails to stay there.

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How much you would have lost if the trade went against you, in % terms w.r.t your PF?

Are you talking about futures or options? And what is the minimum amount needed to do this?

I wouldn’t lose anything. It’s as good as I closed 80 percent of the portfolio in the morning and then bought it back.

I did it in futures today. But sometimes I sell calls too.

Minimum should be nifty value multiplied with 50 lot size.
That is 17750*50

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Yesterday RSI was 80.57 :+1: