Analysis: INFY

Today’s pick is INFY [stockquote]INFY[/stockquote]. The stock was moving in a range till March since starting of the year. It then fell sharply to Rs. 2,400 levels in April after moving in range till July the stock again fell to Rs. 2,200 levels. Since then the stock has been on an uptrend. In the last three months, the stock has moved +16% vs. +5% of the Nifty’s.

INFY technical analysis chart

Oscillator RSI is hovering in the over-bought territory whereas CMO is in no man’s land. The stock is trading in the middle of Bollinger band not suggesting any directional move. However, short-term technical just saw 9×4 bearish cross-over.

The MACD line has just penetrated the signal line in a bearish manner. However, both long-term and short-term GMMA lines are very distant from each other, giving out an extremely bullish sign for the scrip.

INFY correlation chart

INFY’s average correlation with the Nifty is 0.51 which is positive. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

INFY volatility chart

INFY has a historical volatility in the range of 0.2 to 0.7. The scrip’s volatility is currently in the higher end of the range.

INFY Analyst coverage

Majority of analysts are suggesting a hold for this stock given the current condition of the IT industry.

Given these technicals, we suggest a short-term sell. For the long-term, we suggest a buy given the well spread out GMMA lines. However, we recommend that investors tread with caution given that the spread in the GMMA lines has occurred due to the +20% spike seen at the most recent earnings announcement. Also, for risk management we suggest having trailing stop-losses in case trend-reversal were to take place.

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