Arpan Shah Monarch Networth Capital
Nifty IT index has risen quite sharply in 2018. From December 2017 closing of 11,665, it has risen till 16,250 (Sept-18) returning nearly 40 percent in the first nine months of 2018. But after this rise, the index has fallen sharply from the top and has corrected more than 15 percent.
On November 26, Nifty IT index reached its important support of 13,500 and bounced back sharply to close at 14,000 level. It also made double bottom formation near 13,600.
RSI is also indicating a positive divergence in it. Going ahead we can expect a further pullback in the index and it can reach till 14,500-15,000 from current 14,000 level. It will be invalidated if it closes below 13,500.
Both TCS and Infosys hold around 25 percent weight each in the Nifty IT index. So 50 percent of the heavy lifting of the index is done by only these two stocks.
In the coming days, these two stocks can also see a sharp short-covering rally and it can give a good return on the long side.
Just like Nifty IT index, TCS has also made double bottom kind of formation at Rs 1,800 level. Rs 1,800 is also strong demand zone. It has 200-day moving average (SMA) at this level as well.
From the momentum perspective, it is showing positive divergence. Traders can go long at the current level and expect the upside till Rs 1,930-2,020 from current Rs 1,845. It will be invalidated if it closes below Rs 1,770.
It has bounced back sharply from its demand zone of Rs 600 with strong volume.
Traders can expect the bounce back till Rs 650-675 in coming days from current Rs 620 level. It will be invalidated if it closes below Rs 590.
The author is Technical Analyst at Monarch Networth Capital.
Disclosure: Analyst does not have any direct or indirect financial interest nor any other material conflict of interest at the time of stock recommendation in the subject company. He does not have actual/beneficial ownership of one percent or more securities of the subject company. He does not own any stocks however his relatives might own few of the stocks in their portfolio.
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