CNX IT Futures in medium-term downtrend :: Business Line,

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CNX IT Futures (6363.9): In early April this year we had reviewed CNX IT Futures, which is derived from the underling index CNX IT Index. We had mentioned that a decisive rally above 7,200 can lift the CNX IT futures higher to 7,355 and then to 7,600 in the medium-term and inability to breach 7,200 levels will drag the index futures lower to 6,900, 6,675 and then to 6,500 levels.

The contract thereafter moved above 7,200 levels but it failed to make a strong weekly close above this level. After recording 7,374 in April, the CNX IT futures resumed its intermediate-term downtrend that has been in place since its January peak of 7,630. It declined and touched our downward targets of 6,900, 6,675 to 6,500 levels.

In mid June, the contract fell emphatically below 6,500 levels and bounced up immediately forming a trough at 6,050 levels. CNX IT futures have been vacillating between 6,050 and 6,850 since mid June with negative bias keeps the possibility of the contract declining to 5,850 levels open. We retain the view that a strong fall below 6,500 levels can pull the contract lower to 5,850 and then to 5,450.

Long-term trend for CNX IT Futures remains bullish as long as it hovers above 5,450 levels. Strong move above 7,000 can lift the futures higher to 7,355 and then to 7,600 in the long-term. However, the contract is testing is key support level of 6,500, one more weekly close below this level can pull the contract down to 6,050 and to 5,850 levels in the medium-term.

The CNX IT Futures has been on a medium-term downtrend from its April peak of 7,374 levels. On July 12, the contract fell by 2.8 per cent breaching its 21 and 50-day moving averages.

It currently is trading well below these averages and also its 200-day moving average. Both daily and weekly price rate of change indicators are featuring in the negative territory signalling selling interest.

Daily moving average convergence divergence has signalled a sell and is on the brink of entering in the negative territory. Its weekly indicator is hovering in the negative terrain implying downward momentum. The 14-day relative strength index is hovering in the bearish zone.

CNX IT Futures can continue its decline and reach 6,170 and then to 6,050 in the ensuing weeks. On the other hand; only a strong move above 6,850 will mar the medium-term downtrend and take the contract higher to 7,000 levels. Immediate resistances for the contract are at 6,580 and 6,735 levels.