The Nifty IT index tumbled 2.46 per cent on Friday to close at 15,550, breaking below a key support at 16,000. The index has been on a short-term downtrend since recording a new high at 16,720 in late April. After a corrective up-move the index encountered a key resistance at 16,400 in early June and resumed the downtrend.

While trending down, the nifty IT index breached a key support at 16,200 in late June and the vital support level of 16,00 in early July. Moreover, the index decisively breached its 21-day and 50-day moving averages recently and trades well below them. However, it is paused just above the next key support as well as the 200-day moving average at 15,400. A plunge below the base will underpin the bearish momentum and drag the index lower to 15,200 and 15,000 levels in the short term. A further decline below the key medium-term support level of 15,000 will mitigate the uptrend in place from the December 2018 low of 13,581.

In that scenario, the index can test next supports at 14,600 and 14,400 levels, though an upward reversal from the immediate support level of 15,400 can keep the index moving sideways in the wide band between 15,400 and 16,200 for a while. To alter the short-term downtrend, the index needs to conclusively move above 16,000 levels. Such a move will pave the way for a rally to 16,200 and 16,400 in the short term.

Long-term outlook

Since taking support at around 9,300 in late 2016, the index has been in a long-term uptrend. In early 2018, the index had decisively breached key resistance at 12,700 and continued to trend upwards. The long-term uptrend will remain intact as long as the index trades above the key support in the band between 12,500 and 12,700.

Before this zone, another significant support to note is in the 13,800-14,000 zone. A rally above the resistance level of 16,200 will reinforce the long-term uptrend and take the index northwards to 16,700 again.

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