IT Stocks: The White Knights

Hello viewers. Welcome to the Fast Profits Daily. Myself, Brijesh Bhatia.

Markets have been dipping lower and lower, and the volatility has been very, very high and that too, with the gap up and gap down openings. This is on the back of the Russia and Ukraine war. The news are sometimes positive. Sometime negative, and the market reacts with the gap up and gap down opening.

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Well, as a trader, I would say, it's time that we take a pause. If you're remember I've done a video last week - A Trader's War Room. In case you haven't watched that go to our archives and watch that video where I've highlighted that the volatility has been very extreme.

In the February month out of 20 trading sessions, 18 have been with the gap up or gap down of more than 50 points, which indicates that, even if you were long was short, the volatility, the gap ups and gap downs are not in your hand, and it might hit your stop losses or the loss of more than expected.

So keep in mind that you have to lower down your positions and do a proper risk management before entering into the traders.

In this video I'll be discussing as you've seen the heading, IT sector I think, is coming up as the strong contender, and that could be the one sector which could lead Nifty into the reversal momentum.

 

Now, if you look at the first chart over a here, this is a weekly chart of IT index to Nifty. If you look at last week, we have seen an uptick. It means that IT index is hugely outperforming against the Nifty now. If you look at previous 3-4 weeks of consolidation and then a bullish momentum building up onto the ratio charts, it indicates that IT is coming back very, very strongly.

Most important if you look at the previous lows, which were in 2021, is being held. The structure is being very, very bullish. So the higher high - higher low structure is still intact on to this ratio chart indicating that the momentum is very, very strong for the outperformance of IT index over the Nifty.

 

Let's look at it in next chart of IT index. I will be referring is the daily chart. Now if you look at the blue line, it's the 200 days average, generally termed as the long term average into the technical parameters.

Now, if you look at the momentum, its being holding the 200 days average very, very strong. Since 2020 when the reversal happened, this is the first time the index has tested the 200 days average and has been holding very, very strong.

Even if you look at the uptick in the last couple of weeks from the support zone of 200 days average, it's indicating that the momentum is very, very strong.

 

If you look at the pattern over the here, we are looking at the broadening wedge over here. So if you look at the chart, the low has been held, the broadening wedge structure has been formed. Once the last week or last-to-last week highs are taken out, I believe the momentum will be very, very fast and furious for the IT index on the bullish side which could again lead Nifty to the higher level because we have TCS with a higher weightage, we have Infosys with a higher weightage. There's Tech Mahindra in the Nifty 50 so that could lead a next to the higher level with the Nifty following up the IT index. We might see a reversal coming very, very strongly.

If you remember, we have done a video as well as on Nifty that the long term trend is still very, very bullish amid these circumstances, where the Russia-Ukraine war is going on, markets have been very, very volatile, we have seen markets correcting back toward 16,200 levels. So I believe that once this dust settles down, we might see a bullish momentum coming out.

Well, if you look at the momentum of NASDAQ, generally IT index follows the NASDAQ momentum. So that's look at this and analyse what the NASDAQ chart is indicating

 

Here if we look at the support zone of last year May where it was consolidating before a rally of around 14,000 on the upper side and 13,000 on the lower side that rally has been retested now. the consolidation zone, and once it broke 14,000 levels, we saw 16,700 levels on the higher side. Now that demand zone is coming back very, very strongly.

Plus, if you look at the black lines over here, this is the bullish crab pattern, which is generally the harmonic pattern and Fibonacci are used to calculate such kind of patterns. They are reversal in nature.

So when they form at the crucial support zone or crucial oversold territory, they tend to give a strong reversal momentum. If you look at the blue candle, the big candle over here is a bullish belt hold. Generally bullish belt holds are the structure where the momentum opens with the gap down and there is a sharp rally coming in.

So 13,000, I believe, will be a crucial juncture for bears. If in case they fail to break it, we might see NASDAQ back towards 15,000-15,500 levels considering the bullish harmonic pattern building up.

So we have closed at 13,800-13,900. Any dip towards 13,500 could be a good accumulation in the NASDAQ as well. Till 13,000 is not breached, I think the reversal is in place for NASDAQ and we might head higher.

Again, as I said, IT index is a follower of NASDAQ and the momentum could be back into the bulls court. If the NASDAQ starts recovering IT index will be outperforming against the Nifty. As I said, we have seen a ratio chart. So that could be one trigger. The NASDAQ could be a trigger which could take the IT index higher. And IT could take Nifty higher into the reversal zone.

So keep a watch on this. The last two weeks high of IT index and if those are broken out, we think that the momentum could be fast and furious on the bullish side.

Signing off, Brijesh Bhatia.