IT Back In The Mix

JC Parets
March 23, 2021

How often have we heard that sector rotation is the lifeblood of a bull market? Too often! And there's a reason why it's necessary to repeat this statement. At different stages of a cycle, varied variables are at play. This means that every sector will not move in a uniform manner.

Over the past three months, IT has been consolidating as other sectors took the lead. With sector rotation at play, it seems like IT is back in the mix.

Let's take a look at what IT is doing relative to Nifty 100. After breaking out of an almost 12-year base, Nifty IT has been holding on to the high levels displaying inherent strength. Bouncing off its support the ratio chart favours a positive move in this index going forward.

Click on chart to enlarge view.

Now let’s take a look at some actionable ideas at current levels that look attractive on the long side for the next few weeks and months.

TCS is hovering close to its resistance and looks good for another leg of the rally. The price is back above the crucial level of 3,050 which will act as the risk management level going forward, with a target near 3,830. The price move has been strong and the indicator has steered away from the lower end of the indicator panel.

Tech Mahindra moved past its resistance at 982 and is consolidating above it. With the indicator remaining close to bullish territory, this stock could very well move towards its next resistance as IT circles back into sector rotation.

We are bullish above the level of 982 with a target near 1,370.

Next up among the big names is Wipro. Wipro has been holding above its 261.8% Fibonacci retracement. Due to the principle of polarity the current support (former resistance) of 405 will be crucial to track. 405 will act as the risk management level going forward. The target we're tracking is 555.

Coforge is another prominent name in this sector. Having recently breached a stubborn level of resistance, the stock is trading above the level of 2,850 and has also come up in our other scans that determine strong stocks within strong sectors. The indicator has stayed far from the bearish territory and bullish sentiment continues to play out.

We are positive above the level of 2,850 with a target near 4,160.

L&T Technology & Services has been quite a performer and continues to shine through as one of the strongest names in this sector. With the breach of the 161.8% Fibonacci retracement, pull-backs towards 2,380 can be used as good buying opportunities.

We are bullish above the levels of 2,380 with a target near 3,260.

Next up is Cyient that is breaking out of a two-year base. With the price consolidating above the breakout level and the indicator firmly in the bullish territory, this stock is poised for a sharp move towards its next target. Cyient is yet to breach its all-time highs and is now moving towards sub-900 levels.

We are positive above the level of 615 with a target near 885.

Persistent Systems has been a great wealth generator for investors over the past few months. A strong breakout can be seen above the level of 1,715 as the price continues to march on to higher levels. The indicator too has remained in the bullish territory, barely letting go of the inherent strength in the stock.

We are bullish above the level of 1,715 with a target near 2,516.

Sonata Software moved past a very strong resistance at 428 and has consolidated above it since then, which is a really good sign. As 428 turns into strong support, price corrections towards this important level can be utilized as buying opportunities. The indicator is in positive territory adding to the strength in the stock.

We are bullish above the level of 428 with a target near 600.

Tata Elxsi is knocking against its resistance at 3,010 and has been moving sideways for some time now. This is something we're keeping on our radar to catch the move as soon as we see a breakout above the level.

We are bullish only above the level of 3,010 for a target near 4,560. Until it breaches 3,010, we're happy to wait!

Zensar Technologies is another stock that we're tracking. The stock is exhibiting strength with the indicator firmly placed in bullish momentum territory and price challenging its all-time highs. It seems like it's only a matter of time before we witness a splendid move towards its next target.

We are bullish above the level of 350 with a target near 526.

This was a round-up of some interesting setups we've been tracking in the IT sector. While these stocks are at different stages in their cycles, a tailwind in the form of an IT-sector outperformance would bode well for the above names.

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

Allstarcharts Team

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