The outlook for the stock of Natco Pharma is turning bearish. The stock fell 2 per cent on Monday to decisively close below the 200-DMA at ₹487. The stock was in a strong uptrend from the March low of ₹390. The 100-DMA at ₹497 halted this rally last week. The stock tested the psychological resistance at ₹500 twice last week but failed to break above it. The subsequent reversal in the last two trading days has increased the possibility of seeing a corrective fall in the near term.
The 200-DMA may now act as a good resistance. While below it, the stock can fall to ₹458 — the 38.2 per cent Fibonacci retracement support or ₹451 — the 21-DMA level. Traders with a short-term perspective can go short. Stop-loss can be kept at ₹489 for a target of ₹460. Revise the stop-loss lower to ₹472 as the stock declines to ₹465. The outlook for this stock will turn bullish only if it breaks decisively above the 100-DMA resistance.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)