By Ashish Kyal, CMT, Founder and CEO of Waves Strategy Advisors
On the daily charts, Nifty has broken above the trading range of the past eight sessions, where it was consolidating between 21,440–21,800. The IT sector helped Nifty reach record highs as heavyweights TCS and Infosys gained sharply on Friday, January 12, 2024. Reliance Industries also supported the rally as it has been trading near record highs for the past three trading sessions. Further, we can see healthy sector rotation, where different sectors are contributing to the upmove.
Going by the Elliott wave, prices are currently in wave iii of (v). Hence, it is best to use dips as buying opportunities, unless there is any close below the support level of 21,580 (what to do then, not buy?). A close above the immediate psychological hurdle of 22,000 will further extend the short-term upmove.
In short, the Nifty has just broken out from the flag pattern, and may further accelerate towards 22,118 levels. As long as it is above 21,580, buying on dips can be a prudent strategy.
Nifty Hourly chart:
On the weekly charts, Nifty IT, in the week starting December 11, 2023, broke through the resistance of 34,000 and has managed to hold and close above that level for the past four weeks. On Friday, the index formed a bullish candle and closed above three weeks of consolidation. It is approaching the key resistance level of 36,800. A breach above this can trigger fresh buying in the IT sector and take Nifty IT to a lifetime high of about 40,000. The momentum is strong, so there is a high possibility that the upward journey will continue.
In short, the IT sector looks bullish.
NIFTY IT weekly chart
What to Pick in IT Sector
On Friday, TCS had a 3 percent gap-up opening and closed at the highest point on the weekly chart. TCS has formed a strong bullish candle after three weeks of consolidation. Further upside may be seen above Rs 3,930, with prices reaching an all-time high of around Rs 4,045.
On the daily charts, the stock is near an important resistance zone — Rs 3,905 to 3,930 — and any closing above the latter will indicate fresh buying in TCS. The stochastic RSI (relative strength index) has formed a bullish crossover, suggesting a bullish bias.
Thus, the larger bullish trend is intact.
Naukri has formed an inverted head and shoulder pattern on the daily charts and it is on the edge of a breakout from the same. A close above Rs 5,387 is needed to confirm the breakout, after which, a good rise is expected in this stock.
Along with this, volumes are also picking up, which is acting as a confirmation of the bullish stance. After a breakout, we can expect a rise towards Rs 5,760 levels, whereas Rs 5,000 is the nearest support level.
Follow Ashish Kyal on Twitter - @kyalashish
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