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We recommend a buy in the stock of Sun Pharma Advanced Research Company from a short-term perspective. It is apparent from the charts of the stock that after registering a 52-week high at Rs 145 in early January, the stock started to decline. Since then, it has been on a medium-term downtrend. However, presence of significant long-term support in the band between Rs 103 and Rs 107, provided base for the stock in late January and early March this year.
This support band also coincides with 50 per cent fibonacci retracement level of the stock's prior uptrend. After testing the aforementioned support band, the stock reversed higher by gaining 5.8 per cent accompanied by above average volume on Tuesday. Its upward reversal is backed by positive divergence in daily moving average convergence divergence (MACD) indicator. The daily and weekly relative strength index are moving higher in the neutral region towards the bullish zone.
The daily price rate of change indicator has entered the positive terrain implying buying interest and daily MACD has also signalled a buy. As the stock is reversing higher for a significant support band, we are bullish on the stock from a short-term perspective. We expect its rally to continue and reach our price target of Rs 117 or Rs 119.5 in the upcoming trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 110.20 level.
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