Sector Technical Watch Periodical technical report on Banking & IT sectors :: HDFC Securities

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BANKING
Observation: • Daily Timeframe: The banking sector has been in a decent up trend and after the formation of swing low around 13810, as the sector shifted into consolidation with positive bias. • Presently, the sector is showing minor upmove, as it is forming higher high formations as per daily timeframe chart. This is positive bias and one may expect further upmove for coming sessions. • The sector participants like SBIN, Axis Bank, HDFC Bank, BOI, Kotak Bank, ICICI Bank, Fed Bank, Canara Bank, Yes Bank and IndusInd Bank are all now showing upmove after the sharp declines or they are forming consolidation pattern at the lows. • Weekly timeframe: After a sharp decline in last week, the Banking sector was able to show upside bounce back during this week and closed with minor gains, as per w-o-w basis. • We observe a formation of ‘inside day’ (harami pattern) during this week; the range of this week was within a high low range of last week. This is positive indication and it suggests halt in prior downside momentum. • We observe a formation of negative sequence of lower tops and bottoms and the last week’s low of 13810 levels could be considered as a new lower bottom of the sequence. Now, one may expect beginning of upside bounce back from here.

Summing Up: • The Banking sector seems to have formed a bottom for short term and one may expect pullback rally for coming week. The maximum upside levels to be watched is around 14725 levels in the next couple of weeks. Hence, one may look to buy banking sector/sector components for a reasonable upmove for the next 1-2 weeks.

IT
 Observation: • Daily timeframe: After a sharp decline of previous week, the IT sector bounced back smartly during this week and closed near the week’s high. • The IT sector has now placed on the edge of the key valuation resistance around 10800 (pink horizontal line), as per the concept of change in polarity. A decisive upmove above this hurdle could have further positive impact on the sector for next week. • The key sector participants like Infosys, TCS, Wipro, Tech Mahindra, HCL Tech and Mind Tree are all showing smart upside bounce back, after a sharp declines. • Weekly Timeframe: After making repeated attempt to show upmove, the IT sector witnessed a sharp decline during mid of Feb and has showed reasonable upside bounce back during last week. • We observe an inside day weekly pattern, which is suggesting that bulls are fighting back to gain the defense. • After breaking sharply below the strong support of around 10890 levels (green lower dashed up trend line), the IT sector is now moving up and nearing a key resistance of prior broken area of 10890 levels, as per the concept of change in polarity. • Weekly 14 period RSI moved up and closed above 40 levels. From the current reading of 42 levels, weekly RSI is expected to move up to 49-50 levels. This expected action of RSI could mean some more upmove for the sector ahead.

Summing Up: • The underlying short term trend of IT sector is positive, but significant upmove is not expected from here. The IT sector is expected to move up to 10950-60 levels in the next 1-2 weeks. The possibility of IT sector showing higher levels correction (higher levels reversal pattern) is high. • One may look to create long positions in IT components for the next 1 or 2 weeks for the minor upside bounce and look to exit at long positions at overhead resistance.