The stock of Dr. Reddy’s Laboratories faces strong resistance at ₹4,000. The scrip has been finding it difficult to break that level for the past week. Also, in the daily chart, the price action hints at considerable selling pressure, as the stock moves towards ₹4,000. Thus, traders hunting for short-term opportunities can consider initiating fresh short positions in the stock.

The stock has largely moved in a broad sideways trend in 2019 i.e. between ₹2,500 and ₹3,000. But it broke out of ₹3,000 in early 2020, which turned the medium-term trend bullish.

Though the stock witnessed a temporary fall, that dragged the price to ₹2,500 in March this year, it recovered quickly and accelerated to break out of its prior high. The rally took the price to a fresh 52-week high of ₹4,094.3. But unable to sustain above the ₹4,000 level, the stock moderated to levels below it and has been exhibiting a bearish bias. Corroborating this, the Relative Strength Index (RSI) in both the daily and the weekly chart indicates that the bulls might be losing strength. Also, the Moving Average Convergence Divergence (MACD) indicator in the daily chart signals that the uptrend is losing traction, as it gradually turns its trajectory downwards.

Considering the above factors, though the trend has been upward in the current year, the stock is showing signs of a short-term bear trend. Hence, traders can sell the stock with stop-loss at ₹4,040. The potential targets can be at ₹3,800 and ₹3,750.

 

Supports: ₹3,800 and ₹3,750

Resistances: ₹4,000 and ₹4,030

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