Technical Analysis

Long-term trend is down for Lupin

Yoganand D | Updated on March 10, 2018 Published on April 30, 2017

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The stock breached the key long-term support level of ₹1,400 by falling 5 per cent



Here are answers to readers’ queries on the performance of their stock holdings.

What is the outlook for pharma companies, especially for the stocks of Lupin and Sun Pharmaceutical in 2017-18?

N Raman

Lupin (₹1,337.8): The stock of Lupin has been on an intermediate-term downtrend since it encountered a key resistance at ₹2,100 in October 2015.

The stock found support at around ₹1,400 in March 2016 and this provided base until recently. Last week, the stock emphatically breached the key long-term support level of ₹1,400 by tumbling 5 per cent.

The medium and short-term trends are down for the stock. It trades well below its 50 as well as 200-day moving averages.

Further, the daily as well as weekly relative strength index feature in the bearish zone, backing the downtrend and showing signs of further weakness.

Moreover, other daily indicators such as price rate of change and moving average convergence divergence hover in the negative territory supporting the stock’s downtrend.

In the weekly chart, the stock breached its 200-week moving average last week, indicating bearishness. The short as well as medium-term outlook is bearish for the stock of Lupin.

Any corrective rally in the near term can encounter resistances at ₹1,400 or ₹1,500, which the stock failed to break during late 2016 and early 2017.

Continuation of the intermediate-term downtrend can pull the stock down to ₹1,300 and ₹1,100 in the ensuing months. Investors can refrain from buying the stock at the current levels.

Strong decline below ₹1,300 can drag the stock down to ₹1,200 and then to ₹1,100. Investors with a long-term perspective can wait and consider buying below ₹1,200 with a long-term stop-loss placed at ₹1,100.

To alter the intermediate-term downtrend, the stock needs to emphatically move beyond the key resistance level of ₹1,800. Subsequent key resistances are placed at ₹1,900 and ₹2,000. Vital resistances above ₹1,500 are placed at ₹1,600 and ₹1,700.

Sun Pharmaceutical Industries (₹642.5): The stock of Sun Pharmaceutical hovers at a crucial long-term trend-deciding zone. Currently, the stock tests a significant long-term support in the band between ₹620 and ₹650. A decisive slump below this zone will alter the long-term uptrend and pull the stock down to ₹570 and ₹550 levels.

On the other hand, key resistance at ₹700 is limiting the upside in the stock. Conclusive rally beyond ₹700 is needed to alter the short-term downtrend.

To alter the intermediate-term downtrend that has been in place since the all-time high at ₹1,200 in April 2015, the stock needs to move beyond ₹875 levels. The stock has been on a medium-term sideways consolidation phase in the wide range between ₹600 and ₹730 since November 2016. Strong rally above ₹700 is required to change this sideways trend and take the stock higher to ₹850 levels.

Long-term targets on a strong rally beyond ₹850 are ₹950 and ₹1,000. Investors with a long-term perspective should avoid buying this stock at this juncture.

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Published on April 30, 2017
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