Reversal: ‘Oversold' F&O Stock Looking to Pare Some Losses!

  • Stock Market Analysis
Aayush Khanna/Investing.com - Investing.com

For mean reversion traders, one counter that has come on my radar and should be on your watchlist is Biocon Limited (NS: BION ). It is a well-known biotechnology company with a market capitalization of INR 28,378 crores and has delivered decent losses in the recent past. The one-way fall in the stock eroded 39.6% of its value in the last one year, giving a tough time to investors. 

The plunge since the swing high of INR 295, marked on 21 November 2022 had thrown the stock to a new 52-week low of INR 229.65 on 30 January 2023, where the RSI (daily, 14) was showing an oversold reading of 22, comfortably lower than the benchmark level of 30. These levels should carefully be watched as a short position becomes risky here, while an opportunity for a long one is expected to materialize on the back of a high probability of a counter-trend rally. 

Image Description: Daily chart of Biocon with volume bars at the bottom

Image Source: Investing.com

This is one of the favorite setups for mean reversion traders wherein they try to capitalize on this short-term move. The share price of Biocon now seems to be gradually inching up as demand from the lower levels is outstripping the supply, leading the stock to bounce over 6.2% off the low to the CMP of INR 244.1 on 8 February 2023. 

As the stock has already started to pare some of the recent losses, the rally might take it to the immediate hurdle of INR 260. Because this is a short-term move, it’s a better play for quick and nimble traders rather than long-term patient ones. As the broader trend is still negative, getting in and out quickly before the rally fades would be the ideal strategy here. 

The options chain data is also conforming to the levels seen on the chart, with the 260 CE holding the highest open interest (OI) of 1,037 contracts, making it a strong resistance level. Also, 230 PE has the highest OI on the put side which is almost at the recent 52-week low, a good confluence to make up a strong support level. Hence, for options traders, the range for the current monthly expiry is 230 - 260 with a slightly upward bias. 

Add Chart to Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
Please try another search
  • Ram Modi @Ram Modi
    Sir a beautiful & meaningful analysis, it was on my radar, pls suggest option level & future also with a decent stop loss
    Like 0
  • Mahendra Patil @Mahendra Patil
    sir, what is about PNB Feb Exp?
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      It might not expire above 55
      Like 0

      • Comment Guidelines

      We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

      • Enrich the conversation
      • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
      • Be respectful. Even negative opinions can be framed positively and diplomatically.
      •  Use standard writing style. Include punctuation and upper and lower cases.
      • NOTE: Spam and/or promotional messages and links within a comment will be removed
      • Avoid profanity, slander or personal attacks directed at an author or another user.
      • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
      • Only English comments will be allowed.

      Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

      Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
      Please try another search
  • Esskay Sharma @Esskay Sharma
    Perfect analysis!
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Thanks.
      Like 0

      • Comment Guidelines

      We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

      • Enrich the conversation
      • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
      • Be respectful. Even negative opinions can be framed positively and diplomatically.
      •  Use standard writing style. Include punctuation and upper and lower cases.
      • NOTE: Spam and/or promotional messages and links within a comment will be removed
      • Avoid profanity, slander or personal attacks directed at an author or another user.
      • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
      • Only English comments will be allowed.

      Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

      Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
      Please try another search
  • Gopabandhu Bhoi @Gopabandhu Bhoi
    Sir what about LLOYD STEEL please explain
    Like 1

Related Articles