Wednesday, June 29, 2016

Pharma stocks likely to move over 15% from current levels

Pharma stocks have been correcting since last year. The correction in this sector has lasted more than that of Nifty. While Nifty made a bottom in Feb 2016, majority of pharma stocks continued with their bearish trend.

Brexit could not impact pharma stocks as much it was hyped to be. Due to Brexit Indian Rupee gained good miles against Pound and Euro. Possibly these stocks are getting benefited by increase of INR against Pound and Euro.

Since last few days pharma stocks are ‘basing’ near their long term support. On monthly charts a nice revival pattern is probably in the process of formation. On daily charts formation of higher high and higher low is evident. Some of them are moving out of a long trading range.
Let’s take Cipla as a case study:

Cipla: Cipla has a nice Demand area and a support on monthly chart near the levels of 450-457. You can see that Cipla has made a low of 457.45 in the month of May. On daily chart it has formed a trading range near this support between 457 and 490. Yesterday it broke out of a trading range to close near 497. This suggests us that there can be a short term upside in Cipla. Resistances are near 500 and 520. However if it breaks beyond 545, the stock can have substantial upside.

Cipla Monthly Chart

Cipla Daily Chart

Similar signals can be seen on the charts of Dr Reddy, Lupin and Sunpharma. Auropharma, Biocon are looking good on charts.

Classical charting and Technical Analysis, if analysed and traded with proper risk management, can give us miraculous results. You can read a similar article I had written on possible upside in PSU Banks here.

Similarly a classic charting pattern in Kiri Industries has made it move by more than 50% in a month. Check here why Kiri Industries has given whooping 50% in one month.

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