Thursday, November 13, 2014

Has TCS run its course and is the medium term uptrend in DANGER?

IT sector has given strong returns over past one year. Infact, Indian equity markets have continued to touch new highs everyday but the question remains on sustainability and is it worth the risk to enter now into equity markets?
TCS had given strong returns since the trend changed in 2009. Prices have increased multi-fold from the lows of 360. However, recently for the first time TCS stock behaved similar to Infosys after the result announcement. The stock gave away as much as 10% of market cap in single day. It therefore becomes important to see if the entire up move is now nearing an end and it is time to stay cautiousatleast over short to medium term.
Look at the below chart of TCS and see the detailed Elliott wave counts along with other technical studies.
TCS Daily Chart:
TCS has failed to rally along with the other IT stocks and it is enagaged in retracing the gap which was created in recent times.
As per daily chart, after the Gap down opening seen post results the stock is struggling to show strong retracement. There is a high possibility that a very important top is in place at 2840 levels and the medium term trend for this stock has reversed to downside. For negative confirmation it will be prudent to wait for 2335 levels to break which is the ii – iv trendline and the red moving average support as well.
The chart shows very clear Elliott wave pattern but it is ideal to wait for support levels to break for confirmation for your investment positions.
Many traders or analysts on sidelines are thinking that the rally might resume and it is better to enter now in Indian equity markets but we are looking at the risk that is increasing with each passing day and the momentum that is showing divergence across the scales. It is not worth the risk!!!
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