Technical Analysis

Sun Pharma — going the healthy way

Yoganand D | Updated on January 17, 2018 Published on August 21, 2016

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Long-term uptrend will continue till the stock trades above the support at ₹650



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

I bought shares of BHEL at ₹267 and Sun Pharma at ₹920. Can I sell them and book losses or should I hold them?

Anjali bende

BHEL (₹141.9): The long-term trend in the stock of BHEL continues to be down. Significant resistance in the band between ₹290 and ₹300 restricted the stock's recovery in May 2014 as well as in February and August last year.

The stock resumed its downtrend and has been trending lower since then. However, after taking support in the range between ₹90 and ₹100 in February 2016, the stock started to trend upwards and has been on a corrective medium-term uptrend.

The stock is currently well-poised to breach its moving average compression (21, 50 and 200-day moving average) at around ₹140. An emphatic breach of this as well as immediate resistance at ₹150 will strengthen the bullish momentum and take the stock higher to ₹175 and then to ₹200 in the medium to long term.

You can consider averaging at current levels with a stop-loss at ₹120. Further rally beyond ₹200 can take the stock higher to ₹230 and ₹255 levels. Next significant resistances are at ₹300 and ₹350.

Only an emphatic break-out of ₹350 will alter the long-term downtrend. Inability to move past ₹150 can keep the stock wavering in the band between ₹120 and ₹150 for a while. But a slump below the immediate support can drag the stock down to test the key long-term support band between ₹90 and ₹100 once again.

Sun Pharmaceutical Industries (₹782.7): The long-term trend continues to be up for the stock of Sun Pharma despite its decline from the all-time high recorded at ₹1,200 in April 2015. Key support at around ₹710 cushioned the stock’s fall in November 2015 and again in June this year.

Encountering an immediate resistance at ₹850, the stock has been declining over the last two weeks. It currently trades just above a key support at ₹770.

A slump below this level can pull the stock down to the ₹700-710 zone in the short term with a minor halt at around ₹740. The stock can again take support at around ₹710 and rebound. You can make use of the corrective declines to average the stock with a stop-loss at ₹690. Resumption of the uptrend can take the stock higher to ₹850.

Decisive breakthrough of ₹850 will pave way for an up move to ₹900 and then to ₹950 in the medium to long term. Long-term uptrend will remain intact as long as the stock trades above the significant support level at ₹650.

Investors with a long-term perspective can hold the stock with a stop-loss at ₹640. Key resistances above ₹950 are placed at ₹1,000 and ₹1,500.

What is the outlook for United Spirits bought at ₹3,100. Should I sell or average it?

Srinivasan Narain

United Spirits (₹2261.2): Since recording an all-time high at ₹4,080 in March 2015, the stock has been on an intermediate-term downtrend, forming lower peaks and troughs.

The stock tests a key support at ₹2,250 after retracing 50 per cent fibonacci retracement level of its prior uptrend. Moreover, it currently tests a key trend-deciding band between ₹2,150 and ₹2,250.

A conclusive slump below this band will alter the long-term uptrend and drag the stock down to ₹2,000 and ₹1,700 levels in the medium term. In such a scenario, consider exiting the stock.

The stock has been on a medium-term sideways consolidation phase in the range between ₹2,250 and ₹2,700 from this February. An upward reversal from the current support zone can take the stock northwards to the upper boundary at ₹2,700 in the short to medium term. Conclusive breakthrough of ₹2,700 can push the stock higher to ₹3,000 and then to ₹3,300. Strong rally beyond ₹3,300 is required to alter the intermediate-term downtrend and take the stock up to ₹3,600 and ₹3,800. Consider averaging on a rally beyond ₹2,700 levels with a stop-loss at ₹2,300.

Send your queries to techtrail@thehindu.co.in

Published on August 21, 2016

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