TCS trading strategy: Trading Strategy: Trade TCS before the June quarter results.


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For the quarter ending June 30, on Friday, revenues could have increased by double digits year-on-year (YoY). The stock has been under selling pressure despite expectations for a strong quarterly showing.

Data shows that the scrip declined by just over 10 percent in the last three month. It closed at 0.8 percent higher on Thursday than it was the previous day, which is a day ahead.

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 for the pattern is approximately Rs 3300. Experts believe that if the stock closes above this level and holds gains after results, then the rally may extend towards Rs 3400-3480 in short-term.

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“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 for the right shoulder is 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 currently in a downtrend. It has corrected by around 30% so far this year. It’s also showing a lower top/bottom formation. To negate this formation, it must surpass 29000 on the higher side.

“Looking at the recent recovery from the oversold territory, we can expect this pullback to continue. It is better not to wait

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’ve compiled strategies from different experts on how traders can trade TCS before they get results.

Expert: Anand James at Chief Market Strategist
Naked call and bull spread are options for traders. Puts are preferred. 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

Long build-up. TCS is expected to rise 3.5-8 per cent in July due to new CEs.

Expert: Amol Athawale Deputy Vice President Technical Research, Kotak Securities
The stock’s short term texture isn’t directional. Perhaps traders wait for one side to break out.

Bulls should be watching Rs 3350, or the 50-Day SMA as a key breakout level. If the stock trades above this level, we can expect a new uptrend rally towards Rs 3400-3450.

The flip side is that if the stock begins to trade below Rs. 3200, then weakness may increase, and the stock could move towards Rs. 3150-3120.

Expert: Nilesh Jin, Analyst – Technical and Derivatives Research Centrum Broking
One strategy to capitalize on the upward momentum in TCS is to use a Bull Call Spread Strategy. This involves buying 1 lot at Rs 3300 Call 81 and selling 1 lot at Rs 3400 call 41.

This strategy has a total outflow of Rs 40 and a reward of Rs 60. A stop loss of 15 R can be used to limit loss.

(Disclaimer – The opinions, recommendations, and suggestions of the experts are theirs. These opinions do not reflect the views of Economic Times.


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