IT-Sector technical watch :: HDFC Securities

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BSE IT: - Some more upmove is likely and the new all time high formation above 11326 levels could be expected for
short term. But sustaining around the new high is going to be a crucial in the next couple of weeks.

Current Observation:

 Daily Timeframe: After a sharp upmove during early to mid Jan 2015, the IT sector continued its upward journey for

the last couple of weeks and has reached the swing high of around 11265 levels.

 Though the IT sector is moving up, the range of move in the last couple of weeks have been muted and it seems to

be a lackluster kind of upmove. Breadth of the sector could be a concern for near term.

 The immediate hurdle of previous broken support area of up sloping trend line (brown line) has been broken

marginally in last session around 11170 levels. Now, one has to view this upside breakout in terms of follow through

buying action.

 Daily short term momentum oscillator like 8 period ROC has reached the overbought region of around 6-7 levels.

 Among the large cap sector participants, Infosys and Wipro are some stocks which are showing consistent upmoves

over the last few sessions and that seems to be dragging the sector upwards.

 Other participants like, TCS, HCL Tech are showing sideways consolidation with weak bias. Mid cap stocks like NIIT

Tech, Tata Elaxi, Persistent, Cyient, OFSS, CMC, Eclerx, Mind Tree, Mphasis, Tech Mahindra, Naukri etc are all

showing sideways consolidation with weak bias. KPIT is the only stock which is currently showing positive trend.

 Weekly timeframe: Larger timeframe like weekly of IT sector is showing a sharp upmove in the last couple of weeks

and the opening downside gap of mid of Dec-14 has been filled completely.

 Currently the IT sector is reaching the crucial juncture of multiple of hurdles of previous high (green horizontal line)

and the resistance area of previous broken trend line (blue line, which is connected from the intermediate bottom of

around 8155-mid to later May-14) comes around 11330-11380 levels.

 In the case of Nifty, the similar kind of hurdles have been broken decisively and the index moved into new all time

high area, but the IT sector is now showing weak relative strength compared to Nifty.

 The weekly momentum oscillator like 14 week RSI has been showing consistent lower highs and previously it showed

negative divergence pattern. The behavior indicates the formation of yet another negative divergence pattern could be

expected. This suggests new all time high for this sector for near term.

Summing Up:

 The short and larger term chart pattern are showing the continuation of upmove for some more period in IT sector

for near term, but sustaining around the new all time high could be raising concern for this sector ahead.

 Next upside levels to be watched around 11500 and 11630 levels (1.236 % extension from the recent H&L-weekly)

for the next couple of weeks and the immediate support is placed around 11125 levels.

 One may look to go long positions in Infosys, Wipro, KPIT and Hexaware, which could push the sector to further

highs.

LINK

http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010914