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We recommend a sell in Dr Reddy’s Laboratories from a short-term perspective. It is evident from the charts of Dr Reddy’s Laboratories that the stock has been on a long-term downtrend since its May 2006 peak of Rs 877. However, the stock found support at Rs 500 levels in mid February 2008 and gradually moved up. This up move of the stock encountered resistance at Rs 630 level (200-day moving average acted as significant resistance at Rs 630) more recently and began to decline by forming a bearish engulfing candlestick pattern (which is a bearish reversal pattern). The daily momentum indicator has entered the neutral region from the bullish zone and the weekly momentum indicator is featuring in the neutral region. Our short-term forecast for the stock is bearish. We expect the stock to decline further to our price target of Rs 510 in the upcoming trading sessions. Investor with short-term perspective can sell the stock while keeping the stop-loss at Rs 626.

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