Infy Target Rs. 4,950 ???

INFY has been in a strong uptrende ever since the low it made in May,  with a spate of positive developments after  Vishal Sikka took over as the CEO of the company. The stock touched a high of Rs.  3,890 and  has corrected to Rs. 3,780.

The following weekly chart shows INFY may be forming a possible inverse H&S pattern on the weekly chart and if manages to cross Rs. 4,000 with substantial volumes, may be heading to a target of Rs. 4,950 over the medium term time horizon of 6-8 months.

The TTO is indicating a short term weakness which may result in the stock consolidating at Rs. 3,700 to Rs. 3,600 levels before a fresh upmove begins.

The target indicated is pre bonus and needs to be adjusted for post bonus price.

INFY Leads the Market

In the absence of any significant contribution by Reliance, ONGC and other market heavyweights, the market was looking for leadership from the other leggards in the tech sector which have been underperforming the market for a while.

In our update Will INFY Lead the Market ??   dated July 31, 2014, we had considered the possibility of INFY taking over the leadership and support the market which was under tremendous pressure in the wake of geopolitical developments and was threatening to break important levels. Further, in our earlier update Is the Worst Over for Tech Stocks ??   dated  June 25,2014 we had indicated a turnaround in the tech stocks.

With Rupee toucing the crucial support of 58 and reversing, the tech stocks have reversed the downtrend  and look to retest the recent highs.

Seen below is the Relative Performance of INFY, which has outperformed Nifty and almost all other stocks.

Will INFY lead the market ??

INFY has significantly underperformed the market, ever since Nifty broke out to start a new bull market in March 2014, in effect impacting the market negatively.  The stock has fallen from the high of Rs. 3,844 in March 2014 to  Rs. 2,907 in May 2014, a correction of almost 25%,  pretty significant considering its weight in Nifty. Though technology as a pack has underperformed, the fall in INFY was more sever due to company specific developments.

Is the storm over for  INFY ??  In our update  Is the Worst Over for Tech Stocks ?? ,   dated June 25, 2014, we had indicated a possible trend reversal for the tech stocks. Since then the CNX IT index has moved up from 9,700 to 10,360 and may be moving ahead to the higher target.

The daily chart of INFY had a failed inverse H&S formation  earlier, but has been again forming a bigger inverse H&S. A cross over Rs. 3,430 with higher volumes  may take INFY to a new high of  Rs. 3,900 in the medium term. In the monthly chart, TTO is making bullish pattern formation with similar target.

Though INFY has promising chart formation, whether it will take its leadership position to propel  Nifty to new highs ?? We will have to wait and watch !!

Is the Worst Over for Tech Stocks ??

The technology pack have significantly under performed the market in the last few months. Tech stocks did not participate in the recent rally as almost all tech stocks led by INFY witnessed deep correction from their highs. INR is again showing signs of weakness after touching 58 levels, infusing life in the tech stocks.

The recent spurt in these stocks is showing signs of trend reversal, as economic recovery in US gathers momentum. The US Fed decision to continue with the tapering strengthens  the belief of a rebound. The Fed plan to reduced the  monthly purchases of mortgage and Treasury bonds by another $10 billion next month to $35 billion. There are good reasons to expect faster growth of US economy in 2015 and 2016, which augers well for tech companies in India.

The following TTO charts of INFY, Wipro and TCS show a trend transition taking place as the medium term trend oscillator crosses over the long term trend and a short term weakness providing  good opportunity to enter these stocks.With a healthy consolidation  and correction, these stocks are all set to be major contributors to the Nifty in future.

The following monthly chart of NSEIT confirms bullish alignment pattern in a long term bull market in IT and the recent weakness  was a short term correction and an opportunity to get in. With the correction in the IT index seemingly over, the NSEIT now has a target of  11200.

  

The following monthly chart of USDINR shows Rupee is likely to weaken in the next few quarters to 66-68 levels unless there is intervention by the RBI to maintain Rupee at current levels.  A 10-12% depreciation in INR will boost the earnings of tech companies significantly. 

Tech : The Only Saving Grace !!

Nifty heavyweights have been in a downtrend of late with the exception of technology as Iraq, inflation and poor monsoon take its toll on the market.

Tech stocks, which under performed  for a while now, due to Rupee appreciation, are now supporting the Nifty and keep it above 7500. If not for the buoyancy in tech stocks, we may have been looking at a Nifty level of 7200.

The following chart showing Relative Performance  indicates how the tide has turned in favor of tech stocks since June 10th.

Peeping into the Future

Stock price move erratically. Any help a trader might get to predict the future trend is welcome.

In our post dated March 21, 2014 titled, INFY PULLBACK , the TTO indicated a trend transition in INFY. The short  term  trend momentum had already started moving up, above the long term momentum, thereby indicating that the scrip has bottomed out for the short term  and is poised to move up, pending a buy signal. This was a good eight days in advance !!

Subsequently, a buy was generated at 3230-40 levels and the price has started moving up. One can continue to ride the uptrend till  any signs of weakness. The resistance areas could be 3410 and if surpassed, 3650.

INFY Pullback

INFY attempting a pullback  as can be seen from the trend transition taking place in the chart below. The target is any body's guess......

INFY Fall - Didn't TTO foresee it ??

We discussed the top and reversal of INFY in the post YESTERDAY ....
http://eqtrend.blogspot.in/2014/03/how-infy-top-and-reversal-was-detected.html

How INFY top and reversal was detected ??

INFY and technology stocks had a good month long run before they ran out of steam and other index stocks took over to lead NIFTY.

The top and reversal could be easily established on the hourly charts with TTO as shown below. The hourly trend started falling below the daily trend, even as the stock was retesting  new highs, giving a clear signal of impending reversal.

The 15 minute trend continued to show weakness as it failed to pull itself up above the hourly trend. This provided a clear exit signal at 3840 levels. Earlier, the 15 minute trend had started rising above the hourly trend indicating a buy.

Even the daily charts suggested sell as indicated by the trigger line crossover. The buy was indicated at 3580. Once the stock touched 3760, the indicator was showing continuous loss of momentum.