The outlook for the stock of Natco Pharma is bearish. t has been in a strong downtrend since July last year. The price action since August 2020 on the weekly chart indicates a head and shoulder reversal pattern. The sharp 5.5 per cent fall on Tuesday has broken the neckline of this pattern poised at ₹745. It confirms the trend reversal. Also, this fall has taken the stock well below the 200-week moving average which is currently at ₹752. All these strengthens the bearish case. The stock has room to fall further towards ₹600 and even ₹570 over the next one-two months.
The region between ₹745 and ₹752 will act as a strong resistance. Intermediate rallies are likely to be capped at ₹745-₹752. Traders can go short at current levels. Make use of rallies to accumulate shorts at ₹735. Keep the stop-loss at ₹785. Trail the stop-loss down to ₹680 as soon as the stock falls to ₹640. Move the stop-loss further down to ₹625 as soon as the stock touches ₹605 on the downside. Book profits at ₹585. Please note that ₹570 is a strong long-term support. A fresh leg of rally is highly likely from there.
(Note: The recommendations are based on technical analysis. There is risk of loss in trading.)