Chart Check: IT stocks decline post Q2 nos. Do they still hold promise?

Most IT stocks have seen sharp correction post Q2 results. However, the medium-term outlook stays bullish as per their respective technical charts.

After a sharp run-up in the past few months, shares of information technology stocks are now witnessing a strong bout of profit booking by the investors. After slipping over 3 per cent on Thursday, the Nifty IT index was trading flat at 21,612 levels on Friday noon, with 4 constituents declining and 6 advancing.

According to analysts, for the short-term, most positives for the IT stocks are priced in. For instance, those at ICICI Securities, are concerned about the near-term prospects and suggest the euphoria around cloud and digital business segments needs a reality check. That said, for bottom-up investors, the sector does present interesting opportunities of growth/profitability improvement led by micro factors. READ MORE

So, what should be your strategy now? Take a look at what charts suggest.

Tata Consultancy Services Limited (TCS):  The stock witnessed a gap-up opening on October 8 but failed to close decisively. It scaled a high of Rs 2,873 which is the resistance level till date, as the price could not claim a new high. The counter is correcting amid low volume, with Relative Strength Index (RSI) in the overbought condition. Till the price does not show stability or consolidation, one can hold nerves patiently to grab opportunity as the medium term trend is still up above Rs 2,550 mark. A breakout above Rs 2,873 may see a rally towards Rs 3,200 levels, as per the daily chart. CLICK HERE FOR THE CHART
 
Wipro Ltd (WIPRO):  The counter showed tremendous weakness post the Q2 results on October 14. This negative aggression got elevated in the next session with price falling towards Rs 340 levels. The trend remains upward till the stock trades above Rs 320 levels on the closing basis. The recent sessions had seen buying momentum in the range of Rs 330 to Rs 323 levels, as per the daily chart. The stock price shows a buying strength in overbought condition of RSI as per the weekly chart. This indicates a significant bullishness in a bigger chart frame. CLICK HERE FOR THE CHART
 
MindTree Limited (MINDTREE): This counter has seen a sharp correction around the Q2 result announcement. The fall of nearly 20 per cent from the levels of Rs 1,585 could disseminate the bullish sentiment, if the price fails to defend the immediate support of Rs 1,200 levels. One can wait for the counter to show reversal and recovery beyond the immediate resistance of Rs 1,420 levels. Only then, the bullish sentiment may see revival and the price may trend towards Rs 1,600 levels.  CLICK HERE FOR THE CHART
 
HCL TECHNOLOGIES (HCLTECH): If this counter closes below Rs 830, then it may see the weakness heading towards the next support of Rs 775. The price has risen with a support of 50-day moving average (DMA) in the last three months, currently placed at Rs 764. Till the price trades above the 50-DMA on closing basis, the upside bias may prevail with an optimistic outlook towards Rs 900 and Rs 950 levels, as per the daily chart. CLICK HERE FOR THE CHART