Info Edge (Naukri), Leader Turning Laggard

JC Parets
April 28, 2020

The Nifty IT Index remains subdued due to weakness in its largest components, like Tata Consultancy, but under the surface, there's been leaders like Info Edge (Naukri) trending well on an absolute or relative basis.

With that said, several charts are suggesting this leader may be transitioning into a laggard.

Let's take a look at the chart that sparked this thesis.

Below is a weekly chart of Info Edge (Naukri) relative to the Nifty Next 50. Since its breakout to new all-time highs in early 2014, we've seen the Fibonacci Extensions from its 2008-2009 base serve as solid support/resistance levels. Recently, prices hit our fourth upside objective at the 423.6% extension near 0.1056 and have not exceeded it yet.

Click on chart to enlarge view. 

This also comes as momentum diverges negatively from price by making lower highs as prices make higher highs. In our view, as long as prices are below their highs set earlier in the year then there's potential for this trend to reverse and Info Edge to begin underperforming its peers.

Let's take a look at the stock relative to the rest of the IT sector.

Here's Info Edge (Naukri) relative to the Nifty IT Index, also hitting a key Fibonacci level. Prices are failing at the 261.8% extension of their 2007-2016 base as momentum diverges negatively. Very similar action to the Nifty Next 50 Index.

On an absolute basis, the stock has failed to hold decisively above 2,275 after confirming a failed breakout during the last few months of the market's corrective action. Upside momentum has clearly slowed and as long as prices are below 2,275 then there's too much downside risk and opportunity cost in owning the stock.

From a short-term perspective, Info Edge (Naukri) has shown relative strength in the sense that it retraced 61.8% of its February-March decline, while most of the major indexes have only retraced 38.2% of their decline.

With that being said, there is a lot of overhead supply at 2,470 and prices failed to stay above that level last week, even as the major indices continued to rally. This, combined with the fact that momentum has not gotten overbought during this rally, suggests sellers remain in control and there's downside risk in the stock if below 2,470.

Regardless of which way it resolves, it's clear that Info Edge (Naukri) is at a key inflection point on multiple timeframes and on an absolute and relative basis. Unless we see prices break and stay above their levels mentioned on an absolute and relative basis, we're looking for weakness in the stock.

To conclude, we believe this former leader is beginning its transition into a laggard. Now we wait to see if the market agrees.

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

Allstarcharts Team

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