The IT sector: At Crossroads?

CNX IT – Weekly View

The CNX IT index has once again gravitated to its long-term anchor — the 200-week SMA near 34,200. Ever since inception of the index in NSE, it had gone below 200 wee SMA and sustained there on two occasions. The first one was post the dotcom burst. It had painful two years of stay below the average and resurfaced in January 2004.

During the GFC in 2008 the index went below the average and stayed below for almost a year.

In other six occasions the index tested the 200-week SMA briefly went below it rather we can say fiddled with it and rebounded. The last two occasion were during COVID crash of 2020 and April 2025 where it stayed only for a week.

Needless to mention as those were invariably on lower side, the weekly RSI was below 40 and at times had entered the oversold zone as well. This time it is at 38 shades below 40.

Weekly chart of CNX IT testing its 200-week SMA near 34,200, a long-term support that has historically acted as the sector’s lifeline, with RSI hovering in bearish territory around 38.

 A major observation on daily charts points to something interesting.

Momentum indicators offer a mixed picture: while the -DI remains dominant, the ADX has not been rising, suggesting the current downside move lacks strong trend conviction. More importantly,

RSI at 33 is displaying a clear positive divergence — price has registered lower lows, but the oscillator has not followed suit. This is a classic early sign of bearish fatigue, often preceding a technical bounce or consolidation phase.

ATR is at relatively lower value with a mild uptick this week. Broadly it seems to say momentum on downside is missing at these levels.

Daily chart of CNX IT showing positive RSI divergence near 33 while ADX remains unsupportive of the ongoing downside move, low ATR reading hinting at waning bearish strength. Reversal Signals yet to be generated.

The Missing Piece – Reversal Signal

Despite these supportive signs, it is important to stress that a price reversal signal is still absent. Traders and investors will need patience here — as history shows, attempting to pre-empt a bottom without confirmation can be costly. The first meaningful sign of strength would be a failure of the recent breakdown below 34,180. If the index quickly reclaims this level, it could serve as the earliest indication that the bears are losing grip. Until then, caution and discipline remain the operative words. Weekly signals, by their very nature, are slow to react, and one should not jump the gun. Instead, keeping a close eye on the sector and its key constituents over the next few weeks is the more prudent approach.

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