Technology Weighs On Broader Market

JC Parets
December 4, 2019

In May we wrote a post for premium members titled "Technology Issues Continue", speaking about a failed breakout and general lack of trend in Indian Technology stocks.

Our conclusion then was to be avoiding the sector on the long side and that its weakness was a drag on the broader market given its 10% weighting in the Nifty 500.

Today, not much has changed, in fact, it's arguably getting worse.

Let's take a look.

Here's an overlay of the Nifty IT Index and the Nifty IT vs Nifty 500 ratio, which is currently breaking to new 15-month lows. Since late 2018, when prices first approached long-term resistance, they have been consolidating and trying to work through the overhead supply at that level...and now we're failing. Sellers have come in and are pressing prices to new relative lows. This is NOT indicative of outperformance to come...instead, it suggests further underperformance from the Technology sector.

Click on chart to enlarge view.

Here's a view of the Nifty IT Index failing to get above resistance near 16,200 after many attempts this last year and now pressing toward 52-week lows. Prices pressing new lows, momentum in a bearish range, stuck below resistance. These are not characteristics of an uptrend, folks.

Here's Tata Consultancy, the largest component of the IT sector, and it looks exactly the same as the Nifty IT Index. That shouldn't be a surprise. As long as prices are below resistance near 2,260 there's no reason to be bullish Tata Consultancy or IT stocks in general.

To conclude, Technology stocks in India have NOT gotten the memo from the rest of the world. While US Technology stocks outperform and countries like Taiwan with a lot of Semiconductor exposure are pressing new all-time highs, India's Technology sector continues to struggle.

Until we start to see Tata breaking out above 2,260 and the Nifty IT's prices reversing from their 15-month relative lows, we want to continue avoiding Technology stocks in India.

If you enjoyed this post and want access to all of our premium research, start a 30-day risk-free trial or sign up for our "Free Chart of the Week" to receive more free research like this.

Thanks for reading and let us know if you have any questions!

Allstarcharts Team

Filed Under