Technically from one year chart of TCS it appears that the stock faces significant resistance in the area of 1060 to 1070. Also the stock fell from 1196 levels in early July to 918 levels in August end. Since then the stock has been moving up mainly because of short covering and is up more than 15% from the lows of 918. The stock is currently trading at Rs 1058 as on 4th October 2011 12:30 PM. At Rs. 1070 the stock also completes its 50% retracement of the fall it witnessed in July to August.
Fundamentally also the increased risk of Greece default and slowdown in western economy should not augur well for the technology stocks. Valuation wise TCS is trading at expensive valuation than Infosys and Wipro. Also TCS is just 15% below its 52 week high of Rs. 1247 compared to Infosys, which is 30% below its 52 week high of Rs.3493, and Wipro, which is 33% down from its 52 week high of Rs.500
Hence it would be prudent to sell holdings in TCS at around 1070 levels and wait for the stock to correct further before getting into it again.
Traders can sell TCS 1100 call option at the current market price of Rs. 26 with a stop loss at Rs 30.
As projected the stock closed below 1100 levels and hence the recommended trade went successful. However the stock saw lot of volatility due to result event.
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Amit Agarwal
Founder InvestorZclub