Stock Fundamentals

Trading pick of the week: Hikal (₹179.6): Buy

Yoganand D | Updated on April 17, 2021

Investors with a medium-term perspective can buy the stock of Hikal, a small-cap pharmaceuticals company, at current levels.

The company offers solutions across the life sciences value chain. Since recording a multi-year low at ₹57 in March 2020, the stock had been in an intermediate-term uptrend until it encountered a key resistance at around ₹200 last September.

Thereafter, the stock started to trend downwards and had formed a descending channel pattern. This pattern often forms within a long-term uptrend as a continuation pattern.

As the preceding trend is up for the stock, the descending channel pattern acts as a continuation pattern for the stock. An upside break of the pattern that happened last week is bullish. The stock gained 4.4 per cent on Friday, breaching the upper boundary of the descending channel.

In March this year, the stock took support from the long-term base in the band between ₹140 and ₹143 and also the lower boundary of the pattern and bounced up. Since then, it has been in a short-term uptrend.

While trending up, the stock has surpassed the 21- and 50-day moving averages in the past week and trades well above them. There has been an increase in daily volume over the past one week.

The daily relative strength index has entered the bullish zone from the neutral region and the weekly RSI is on the brink of entering the bullish zone from the neutral region. Both the daily and the weekly price rate of change indicators feature in the positive territory, implying buying interest. The short to medium-term outlook is bullish for the stock of Hikal.

The recent upside breakthrough of the descending channel pattern is positive from a medium-term perspective and the stock has strength to trend upwards. With a minor pause at ₹200, the stock can trend upwards to reach the price targets of ₹200 and ₹208 over the medium term. Traders can buy the stock with a stop-loss at ₹164.

Published on April 17, 2021

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