Nifty IT: Momentum indicators suggest overbought, but reversal yet to confirm

After breaking horizontal trendline at 15,050 level, we have witnessed a strong upward momentum in the Nifty IT index. At present, the level of the index has reached near the resistance zone and the momentum indicators are in the overbought zone, but the reversal is yet to be confirmed. Among the constituents, HCL Technologies and Tech Mahindra were the top gainers, while on the flip side, Infibeam Avenues and Oracle Financial Services software were the top losers on Friday.

Among the momentum indicators, the 14-period RSI on the daily chart is in overbought zone and it is currently quoting at 79.75. The stochastic has given a negative crossover in the overbought zone, which suggests a pause in the uptrend and a negative divergence is also developing.

In the near-term, the index is likely to face resistance near 16,250-16,350 zone. While on the downside, the 21-day EMA is likely to act as strong support, which is currently quoting around 15,328, failure to hold this support would lead to further correction up to the level of 15,100.