Technical Analysis

Stock queries: Aurobindo Pharma on a slippery slope

Yoganand D | Updated on November 24, 2019

However, the stock trades above a long-term support, indicating a possible trend-reversal

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

What is short-term outlook for Aurobindo Pharma? I would like to buy it for a short- term horizon.


Aurobindo Pharma (₹428.7):

The stock of Aurobindo Pharma had encountered a key long-term resistance in the band between ₹825 and ₹835 in late April, and started to decline. Since then, it has been in an intermediate-term downtrend.

In early October, the stock emphatically breached a significant long-term support in the ₹530-550 zone and continued to trend downwards. Medium- as well as short-term trends are also down. However, the stock recently found support in the range between ₹390 and ₹400, and hovers slightly above this band.

There has been an increase in daily volume since early October. Both the daily and weekly relative strength indices (RSIs) are displaying positive divergence, implying that a potential trend- reversal is on the cards.

Also, the weekly RSI and price rate of change indicator are featuring in the oversold territory, which also indicates that the stock is due for a corrective up-move.

A strong rally above the immediate resistance at ₹480 and ₹500 can lead to a short-term uptrend. In that case, the stock can trend upwards to ₹550.

Taking a contrarian view, you can consider buying the stock with a stop-loss at ₹390. Any further break above the long-term resistance level of ₹550 will reinforce the uptrend and take the stock higher to ₹600 and then to ₹640.

To alter the intermediate-term downtrend, the stock needs to conclusively break the key resistance at ₹640. Subsequent resistances are at ₹670 and ₹700. On the other hand, an inability to move beyond ₹500 can keep the stock moving sideways in the wide range between ₹390 and ₹500. A fall below ₹390 can drag it downwards to ₹370 and then to ₹350 levels.

I bought shares of Sarda Energy & Minerals at ₹250.What is the long-term view on this share?

Debasish Ojha

Sarda Energy & Minerals (₹176.3):

Ever since recording a multi-year high of ₹639 in January 2018, the stock of Sarda Energy & Minerals has been in a long-term downtrend. The medium-term trend is also down.

But the stock found support at ₹140 in late August and began to consolidate sideways in the band between ₹140 and ₹200. A conclusive break above the upper boundary at ₹200 will alter the sideways trend and take the stock higher to ₹230 and then to ₹250 levels.

Key immediate supports are placed at ₹170 and ₹140. An emphatic fall below ₹140 will underpin the long-term downtrend and drag the stock down to ₹120 and ₹100 levels in the ensuing months.

On the upside, a decisive breakthrough of ₹250 can pave the way for an up-move to ₹270 and then to ₹300 in the long run.

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Published on November 24, 2019

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