Ahead of Q1 results: Sell-off in IT stocks not over yet; TCS can fall 14%

Shares of major IT stocks are trading near key support levels, if that breaks a severe downside seems imminent, indicate charts.

Shares of Information technology (IT) companies are likely to be in focus as they set foot to announce quarterly results starting with Tata Consultancy Services (TCS) this week. The Tata-Group IT services and consulting major - TCS is scheduled to announce its results on Friday, July 08.

In the recent market rout, IT stocks have been badly hit with TCS down almost 18 per cent from its historic peak recorded in January 2022. Among others, Mindtree has plunged 43 per cent. L&T Technology Services and Wipro have tumbled around 50 per cent and 43 per cent, respectively, from their all-time highs.

Amid such backdrop, closer to the quarterly results, should you Buy or Sell IT stocks? Here's what technical charts indicate:-

NIFTY IT INDEX

Outlook: Support at 26,000

The broader outlook for the Nifty IT index seems bearish with a breakdown of “Head and Shoulder” pattern. The index has violated the critical support of 50-weekly moving average (WMA) and 100-WMA placed at 33,745 and 28,600 resulting in more weak sentiment.  
 

The present scenario indicates support at 26,000 and any breach of the same could see the index sliding towards 22,135 level, its 200-WMA, shows the weekly set up. CLICK HERE FOR THE CHART

Tata Consultancy Services (TCS)

Outlook: Weakness under 3,400 could see 14 per cent drawdown

There is a clear breakdown under Rs 3,400 mark, which was the significant support, shows the weekly chart. The trend is weak and as long as it trades under Rs 3,400, the weakness is anticipated to see added sell-off. The following support comes at Rs 2,800 level. CLICK HERE FOR THE CHART

MindTree Limited (MINDTREE)

Outlook: Stock may take breather at 100-WMA

Daily chart shows a higher degree of weakness and the negative downside ahead, as the “Death Cross” breakdown symbolizes a bearish bias.  That said, the current price structure lingers around the support of Rs 2,774, its 100-WMA. As long as the stock clinges to this support level, there seems some possibility of a respite at the counter. CLICK HERE FOR THE CHART

L&T Technology Services Limited (LTTS)

Outlook: Bearish outlook continues to stay afloat 

Post the breach of 200-day moving average (DMA) set at Rs 4,589, the counter saw a steep dive losing a solid 35 per cent in two months. The sell-off is continuing as the stock failed to display any pullback. There is divergence on the Relative Strength Index (RSI), however the price action is not witnessing any bullish strength. As long as the counter trades under Rs 3,300 mark, the bearish sentiment is expected to see further lower levels. The counter can even make a fresh 52-week low, which currently stands at Rs 2,801. CLICK HERE FOR THE CHART

Wipro Ltd (WIPRO)

Outlook: Support is at Rs 400

If the shares of Wipro cling on to the support of Rs 400, the horizontal weekly support, the counter could see some respire towards Rs 450. Only after a decisive close above Rs 450, one can look forward for a turnaround scenario. Otherwise, the stock may see sideways consolidation. CLICK HERE FOR THE CHART