Category Archives: Infosys

Is it Start of the End?

Infosys which has been pillar of many large investor portfolio since almost 2 decades, has taken a hit in last two sessions. This hit could be the Start of the End of Infosys era!  On 13th April, in my post “Can INFY loose its decade old rally?” , i already warned and initiated SELL call with tgts of 920, 840 and 790 of which we have almost reached 2nd destination.  Stock had been in long term consolidation of 3 years long in the range of 900-1100 and was finding out a reason to move out of the range on either side…And finally, we got…….

Resignation of  Mr. Sikka has been the reason of breakout from the consolidation pattern that too on downside. With such an instance it has also given two other bearish confirmation on monthly charts which means we need to be cautious for the stock in long term portfolio.

Firstly, Stock has breached 10 year old channel on Monthly chart which is a strong sign of trend reversal as the selling has been pretty much with higher volumes than average volume. BUT still confirmation would be done if it closes below 880 this expiry.

Secondly, we have got a probable H&S breakout on monthly chart with neckline at 880 level which is exactly at the same level where we got channel breakout.

Now technically on charts, 880 is crucial level to watch for next two weeks but on other side as of now buy back price is set 1150 levels which might be revised.   So when technical and fundamental is not going in same direction, we should avoid any new position unless we have clear picture of future. As a trader i would recommend shorts and as investors i am still intact with my targets of 840 and 790 which now trailing SL at 950! 

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Range volatility expected but find sector specific moves!

After a long time got something to write for Nifty as until last week we were trading strictly in the range of 9000-9360! Finally, this week we got new high 9450 and managed to get life high weekly close. Banking sector was leading markets with PSU Banks outperforming as i had predicted on 25th April in my post “Still some more time to have trust in PSU Banks” ! But now i feel for short term things are turning around.

After a massive rally in Banking stocks , now we have started getting some negative news from banking companies such yesbank’s AGM report, weak mid-cap numbers and many more.

As we can notice in daily charts of Nifty bank above, index has weakening momentum. RSI has already given bearish crossover on its average which is the first sign of weakness. Secondly, two consecutive bearish candle’s on the top are also support profit booking view in coming months. The Blue Box marked is the area of trading until May expiry which suggest that now Nifty Bank could be volatile in that range of 22000-23000. So avoid any long trades as of now because we are near to the higher range. Can look out for stock specific short term selling in Banking Counters.

Where we can expect strong profit booking in Nifty bank with almost 1000 points, on other side, Nifty is expected to be volatile with profit booking on Nifty bank to be balance by IT and to some extent Pharma sector. 

As we could notice in the nifty Daily chart above, we broke out of consolidation range of 9000-9380 last week and now we have widening range of Nifty to 9250-9500 for the rest of the series. One steep fall to 9280 could be expected but we should hold around 9250 as still weekly momentum is expected to be strong. 9250-9280 has lots of support factor like 20 days SMA, trend line support stretched from 9th Nov low and Open interest support. So as a trader i would short Nifty for few session with sl at 9500 while as a investor would wait for 9250 to park my liquidity.

Then what could counter balance Index and Banking fall?…….. IT Sector….

IT sector as noticed in the above weekly graph was in a strong down trend since start of the 2015, as in the white channel. But now new weekly upward channel (Blue channel) has taken a lead which would mean now IT stocks could outperform. Already in last week we some signs from TECHM IT leading markets ahead. So be Long as a trader in next week

Which could be other sector to watch out? …Pharma Sector.

Pharma sector has been most under-performing after IT sector since 2015 where our pharma companies have been under USFDA scanner. But now things are looking to be cooling down and worst seems to be have discounted in pharma sector. NSE Pharma index is at 9 years support which is 200 Weekly average as represented by yellow line in graph above. So still strong momentum hasnt build up which could confirm long positions but we can start accumulating pharma stock as we could expect sharp surge anytime in next 3 months. Start scanning pharma counters.

So strategy now for public participants:

Nifty Index: Write 9200 PE and 9500 CE 

Nifty Bank: Write 23000 CE and Buy 22500 PE with stop loss at 23200

IT Sector: Be long on INFY (tgt 1000) and TECHM (tgt 460)

Pharma sector: Accumulate Sun Pharma and Mid cap pharma stocks.

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Can INFY loose its decade old rally?

Earning season for last quarter kicked off today with Infosys announcing results lower than market expectations. Its top line grew mere at 9.7% approx last year against more thn 17% growth for a decade before. Looking at such disappointing numbers i feel its all over for front line IT stocks for short term. As we all know 62% of Infosys revenue is from North America and when i expect Rupee to get stronger and stronger for coming years and Trump imposing some threat on H1-B Visa than its surely going to impact more negatively on Infosys top line.

This all negativity is almost near to be proving on charts of Infosys….

So above chart is a monthly chart of Infosys which is showing some similar pattern as head and shoulder which if is proven with a close below 900 then we can expect 525 level over few quarters. Secondly if we mark recent most heavy volume months then they all have been negative movements which can hint that investors are unwinding position from portfolio. Thirdly, a support line which has been intact during a decade growht of 17.6% on top line is also coinciding with neckline breakout line so 900 is level to watch out to empty infosys for time being from your long term portfolio.

Strategy for Investors: Sell below 900 from portfolio and buy 1000 CE to hedger your sell until we confirm monthly close

Strategy for traders: Sell on rise with Stop loss of 1050 ..Tgts 920/840/790 over quarters.

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