Top/Down Take: Infosys (INFY)
Step 1 is to look at the stock universe that we follow. Nifty 500 has been moving sideways for a while and has generally been messy. While that has been the immediate short-term trend, when you look at the bigger picture, the index continues to make higher highs and higher lows.
Currently trading a little short of 16,000, the index has resumed its bullish trend after the marginally negative market that we've seen during the last couple of months.
The trend seems to be back on track as of now, and the target to track from here on, would be 16,685.
Click on chart to zoom in
As is always the case, there are certain pockets of the market that outperform others in a given cycle. Today we will discuss one such sector that has displayed strength throughout, regardless of the broader market direction.
Nifty IT has been our 'go-to' sector for quite some time. And the reason being, that the cleanest setups had been popping up from this very sector. In a messy market, it's important to go with the names with the most conviction. And IT has been a source of just that!
The index halted above its Fibonacci retracement level near 34,250. We are now witnessing a resumption in trend here as well. The next target to track would be 49,625.
The one thing we'd like to keep an eye out for is the negative divergence that is creeping up on the chart. Not a reason to scream 'sell' yet. So hold on to your horses.
One reason for that is the positive performance that we're seeing on the relative chart of Nifty IT. If the weakness were to show up, the relative strength would start waning as well.
Doesn't look like that, folks! IT has been relentless and seems to be going strong.
It's time to take a look at the stock that has made its way to this analysis.
One of the stocks that had been coming up in almost every scan is Infosys. The price had been moving sideways for a while and has recently broken out of that narrow range. Currently trading above the crucial level of 1,790, Infosys looks like it's getting ready for the next move.
The indicator too has been moving higher, towards the bullish regime. With a successful retest in price, it seems as though we may see the next target pretty soon.
We are bullish above the risk management level of 1,790 with a target near 2,580.
Here's Infosys on a relative basis for some perspective.
The ratio is bouncing off of its most recent support. This support has acted as a very strong level of resistance in the past. And now, thanks to the principle of polarity, the support gains more significance too!
Nifty IT seems to be ticking all the boxes at the moment. We're definitely keeping a close watch on that negative divergence. But also note that in any up-trend a negative divergence is not a deal-breaker. It only indicates a slow down in momentum, not a breakdown in trend.
It is important to have more signals to make a valid conclusion. The weight of the evidence is important. And currently, it's tilted in favor of the buyers.
Thanks for reading and please let us know if you have any questions!
Allstarcharts Team