CNX IT Index reversing upwards from key support

Yoganand D. | Updated on April 28, 2012 Published on April 28, 2012

The long-term trend has been up for the CNX IT Index since it took support at significant base level around 2,000 levels in early 2009.

But after encountering resistance in the zone between 7,500 and 7,600 in January 2011, the index changed direction and began to trend downwards.

Since then it has been on an intermediate-term downtrend.

Within this down trend, the index has been on an up move between August 2011 and February 2012.

It encountered an important resistance, which was also a key trend deciding level at around 6,700 levels in February and failed to surpass it.

Later in early April, the index nose-dived to 5,700 levels.

As long as the index trades below 6,700, its intermediate-term downtrend will remain in place.

Only a strong break through of 6,700 levels will alter the downtrend and reinforce the bullish momentum. And if that happens, CNX IT Index can rally to 7,200 and 7,600.

To strengthen its long-term uptrend, it needs to breach its significant long-term resistance at 7,600 to trend higher to 8,000. The CNX IT Index has important long-term support at 5,000. A fall below this support will mitigate its uptrend and drag the index down to 4,500 in the long-term.

Following a 61.8 per cent fibonacci retracement of the prior up move between August 2011 and February 2012, the index found support in the band between 5,700 and 5,800 in late April.

The index is reversing higher from this support zone, triggered by a positive divergence in the daily relative strength index. It can rally to 6,015, which is the floor of the gap formed recently and to 6,100 levels in the short term. Next important resistances are at 6,226 and 6,336. A rally above 6,336 is required to alter the current short-term downtrend and take the index northwards to 6,500 and 6,700 levels in the medium-term.

However, a downward reversal from significant resistances such as 6,100, 6,226 or 6,336 will pull the index down to 5,700 and 5,800 support band.

Conclusive decline below 5,700 can pave way for the index to trend lower to 5,400 and 5,200 in the medium term. Immediate key supports are positioned at 5,800 and 5,700 levels.


Published on April 28, 2012
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