HCL Tech (A Rally coming to a close ?)
The IT sector has been on a major bull run yet again with the world becoming more Tech dependent following the Pandemic. HCL Tech has been a major contributor to the rally in the Indian IT space. However for a while now the stock has been consolidating hence forming a triangle supported by the 50 EMA o the support area of the triangle.
There is an interesting study on the stock. If you would see the spaces marked with the Green arrows, you would see how the stock continuously formed higher highs while the RSI formed lower/similar highs. This formation is generally regarded as a Bearish Divergence indicating a reversal in trend, however the price never confirmed to such a move because it never formed a lower low as indicated by the blue arrows. Even now within the triangle the stock has formed a higher low and is now reversing looking for a breakout to the upside. Any breakout might see the stock taking off it's all time high forming yet another Higher High and continuing the uptrend. However in case the stock breaks to the downside forming a lower low then we might see some downward pressure continuing as it will indicate towards a temporary end to the uptrend.
Things have started to turn towards the positive side, with many things working in India's favour like Increasing growth forecasts by different brokerage / research houses, companies delivering better than expected numbers for Q2, the expectation of having a vaccine soon has brought the Index to its all time high and things are just looking better. However we need to keep in mind that the markets are going up only on the expectation that things will be better, We need to see that even though the numbers for a lot of companies have improved they are still lagging the previous year on a half yearly basis and might de grow on a yearly basis as well, which clearly shows the valuations getting stretched even further. Volatility is here to stay until things don's look certain.
So trade with caution and never over expose.
There is an interesting study on the stock. If you would see the spaces marked with the Green arrows, you would see how the stock continuously formed higher highs while the RSI formed lower/similar highs. This formation is generally regarded as a Bearish Divergence indicating a reversal in trend, however the price never confirmed to such a move because it never formed a lower low as indicated by the blue arrows. Even now within the triangle the stock has formed a higher low and is now reversing looking for a breakout to the upside. Any breakout might see the stock taking off it's all time high forming yet another Higher High and continuing the uptrend. However in case the stock breaks to the downside forming a lower low then we might see some downward pressure continuing as it will indicate towards a temporary end to the uptrend.
Things have started to turn towards the positive side, with many things working in India's favour like Increasing growth forecasts by different brokerage / research houses, companies delivering better than expected numbers for Q2, the expectation of having a vaccine soon has brought the Index to its all time high and things are just looking better. However we need to keep in mind that the markets are going up only on the expectation that things will be better, We need to see that even though the numbers for a lot of companies have improved they are still lagging the previous year on a half yearly basis and might de grow on a yearly basis as well, which clearly shows the valuations getting stretched even further. Volatility is here to stay until things don's look certain.
So trade with caution and never over expose.
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