Tech view: How to trade Wipro post $1.45 billion acquisition of Capco

A breakout may lead the stock to Rs 480 and Rs 500 levels

Shares of Wipro, on Friday, dipped over 3 per cent on the BSE to Rs 421.30 after the company announced its biggest-ever buyout worth $1.45 billion (over Rs 10,500 crore) of London-headquartered Capco. Most brokerages retained their 'Neutral' to 'Negative' stance on the IT bellwether with some even slashing their targets for the stock as they flagged integration and execution risks associated with the deal.

"We see significant risks from this acquisition on account of a) integration risk due to Wipro’s weak track record and b) execution risk on challenges related to realizing potential synergies. The execution risk is further aggravated by a weak growth performance from Capco over the last two years – even after adjusting for the drag due to Covid-19," Motilal Oswal Securities (MOSL) analysts said. READ MORE

From a technical viewpoint, this counter needs to conquer the resistance of Rs 450 for a decisive breakout towards Rs 480 and Rs 500 levels. This resistance has become an important obstacle, which the counter is struggling to overcome in recent times. The overall trend is optimistic with the support of the 50-day moving average (DMA), currently placed at Rs 425 levels, as per the daily chart. The next support comes at Rs 408 levels -- the support seen in the recent corrective phase.

The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are supportive of the positive sentiment. The RSI has a formation of double bottom with a breakout, indicating that the upward bias is gradually building strength. Likewise, MACD has succeeded in crossing the zero line upward; which reflects that the trend is in the ascending direction, as per the daily chart.  

The counter is witnessing selling pressure in the overbought territory of RSI, on the weekly time frame. However, until the counter defends the weekly support of Rs 590 levels, the upside bias may see strong reversal towards Rs 450 mark. CLICK HERE FOR THE CHART