Long term investors who have been investing since 2 Decades would be having atleast one IT stocks in their portfolio but the charm of IT stocks seems to be fading out. Since last year we have been witnessing under performance from this sector and now finally it seems to losing complete long term strength.
Above chart is of a NSE IT index and the time frame in picture is weekly. There are two things to be noted technically in this chart, First: Index has been trading in lower channel since the start of 2015 and we are about to break this channel on downside next week which could trigger sell on all Blue chip IT stocks from Long term portfolio. So a trade below 9400 on the index is going to be a first confirmation. Second: Index has traded and closed below 200 Week Average for the first time since 2011 last week…..But looking at indicators may be a pull back could be witnessed. Though not sure of such a pull back so would recommend to start off loading IT stocks on each rise from next week. On the upside resistance could be 11400 while downside the valley is deep!
Some IT stocks charts supporting the fall
Infosys: Stock has closed below 200 Week average with volumes
TCS: Stock has just started dipping out after a consolidation of 2 weeks so its better deal to short TCS then Infy at Current levels
WIPRO: Stock has already been hit due to many fundamental reasons so looking at chart, its a completely avoid trade at this level for any side
HCLTECH: Stock has been outperforming other blue chip IT companies and its only IT Stock still trading above 200 day average ..
So now next week we need to first wait for NSEIT Index to give confirmation of trading below 9400.
Looking at the volatile markets and uncertainty ahead we could go with a spread among IT companies….
Sell HCL Tech and Buy WIPRO…....
Will post again if we get some confirmation!!