Nifty @ 20,000 !
LIFE TIME HIGH on Nifty has bring excitement among market participants & bull run is almost everywhere in the market. But during this chaos, one should never forget favourable risk - reward offering counters so as to manage better risk. One such sector is IT. Let’s dive deep into the charts and understand formations.
Monthly Nifty IT: Time Cycle
Post Covid correction, IT segment ran up significantly to deliver staggering 250% returns in 92 weeks. Since beginning of 2022, price underwent correction of approximately 33% and consolidation for almost 88-89 weeks. Broader formation looks like massive curve, which again confirms time correction. In a way, curve formation is good so as to reduce price damage. Interestingly, index is now showing emergence of earlier bullish trend.
Weekly Nifty IT: Price action with Fibonacci
Fibonacci retracement helps to understand supports in an ongoing bullish rally. Price action retraced 50% of the last advance (highlighted in green colour trendline) and consolidated near that for almost 71 weeks. Previous week was the first week where price came out of consolidation and present week was a follow through of breakout, which adds strength in ongoing rally. “Buy on dip” can be the perfect strategy for the entire sector from positional approach.
Weekly Ratio chart of Nifty IT & Nifty:
Ratio chart helps to understand performance of sector with comparative asset class. Nifty IT to nifty chart came down near previous low and bounced. White trendline, which was operating as resistance zone, has started offering support at the same zone under “change in polarity” concept. Double bottom (in fact little lower bottom) on chart has corresponding higher bottom of RSI, forming “Bullish divergence”, confirming bright possibility of uptrend. Uptrend in ratio chart confirms outperformance of Nifty IT v/s Nifty in the time to come.
Monthly Stocks charts:
I have selected 6 stocks based on formations. All charts are on monthly timeframe with price action, fibonacci and MACD (trend following indicator). For the ease of readers, I am explaining all points in table form for comparison.
|Stock Name||Price Action||Fibonacci Retracement (where support is taken)||MACD|
|Infosys||Falling channel breakout||50%||0 line support taken & turning bullish|
|TCS||Sideways consolidation breakout||38.2%||Higher than 0 line & turning bullish|
|Wipro||Curve formation breakout||61.8%||Below 0 line but reversing|
|Mphasis||Sideways consolidation breakout||61.8%||Crossed 0 line from below & turning bullish|
|HCL Technologies||Cup & Handle breakout||50%||Higher than 0 line & turned bullish|
|Tech Mahindra||Sideways consolidation breakout||61.8%||0 line support taken & turning bullish|
After evaluating all charts on higher timeframe (monthly), one conclusion is that trend is bullish & intact (based on MACD formation). Deepest retracement is 61.8% which is golden ratio, again confirming intact bullish trend. All price actions are confirming breakout and bullish trend.
After studying all charts of higher timeframe, ratio chart & individual stocks charts, one can confirm that trend is intact and one can consider entire sector for investment with huge potential for upside.
Kindly note that this update is only for educational purpose. It is safe to assume that my personal position, my fund’s position, my client’s position and my relative’s position may be open in the counter. Prefer to take the advice of your financial advisor before initiating any position.