The scrip fell by a little over 10 per cent in the last three months, data showed. It closed 0.8 per cent higher on Thursday, a day ahead of results.
Price pattern suggests the formation of an inverted Head & Shoulder pattern on daily charts. An Inverse Head & Shoulder pattern is the mirror image of the Head and Shoulder pattern and is a bullish signal.
It is defined as three bottoms with the middle bottom (head – marked as H) significantly lower than the other two bottoms.
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The neckline of the pattern is around Rs 3300. Hence, if the stock manages to close above the same and hold gains post results, then the rally could stretch towards Rs 3400-3480 in the short term, suggest experts.
“TCS after a long consolidation has formed a base that resembles an inverted head and shoulder pattern on the daily chart where the neckline of the same is placed at Rs 3330,” Nilesh Jain, Analyst – Technical and Derivatives Research, Centrum Broking, said.
“A breakout above the same will open upside for Rs 3400/3480. The support of the right shoulder is placed at Rs 3200. We still need to wait for some confirmation to consider it a bottom formation, but some pullback may continue,” he added.
The Nifty IT index is in a downtrend and has corrected by roughly around 30 per cent so far this year. It is also forming a lower top and lower bottom formation and to negate this formation it needs to surpass 29000 levels on the higher side.
“Looking at the recent recovery from the oversold territory, we can expect this pullback to continue. It is better to wait for
to come out with the numbers which will set the tone for the IT sector,” highlights Jain.
“However, it would be prudent to stick to quality largecap stocks like TCS,
, and ,” recommends Jain.
We have collated strategies from various experts as to how traders can trade TCS ahead of results:
Expert: Anand James, Chief Market Strategist at
Traders can deploy Naked call or bull spread, with puts preferably. TCS has begun to shrug off the 1st half’s bearishness, having closed consistently above or close to the 20d SMA in the last 10 days.
For the last two months consecutively, we had seen short build up along TCS’ futures, but short covering is visible now, which has helped it outperform against both Nifty as well as IT index during the bounce from the recent low of 17 June.
Thursday’s OI spectrum shows that options traders have repositioned their bias and have become more bullish with PEs seeing short build-up, and far OTM
finding long build-up. The fresh additions to CEs suggest a 3.5 to 8 per cent upside in TCS for the July expiry.
Expert: Amol Athawale, Deputy Vice President – Technical Research, Kotak Securities
The short-term texture of the stock is non-directional, perhaps, traders are waiting for either side to breakout.
For the bulls, Rs 3350 or the 50-Day SMA would be an important breakout level to watch. And if the stock manages to trade above the same then we can expect a fresh uptrend rally towards Rs 3400-3450.
On the flip side, if the stock starts to trade below Rs 3200, then weakness could increase and that could take the stock towards Rs 3150-3120.
Expert: Nilesh Jain, Analyst – Technical and Derivatives Research, Centrum Broking
To capture the upside momentum in TCS one can deploy a Bull call spread strategy by buying 1 lot of Rs 3300 Call 81, Sell 1 lot of Rs 3400 Call 41.
The total outflow from this strategy is Rs 40 and the reward of Rs 60. To limit the loss one can keep a stop loss of 15 Rs of the total premium paid.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
