Technical Analysis

Sun Pharma in a long-term downtrend

Yoganand D | Updated on January 09, 2018




In early August, the stock registered a 52-week low at ₹433, attracting buying interest

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

I hold the share of Sun Pharma bought at ₹910. What is the long-term outlook. Should I hold or sell?

V K Divya

Sun Pharmaceutical Industries (₹483.3): Ever since recording a new high of ₹1,200 in April 2015, the stock has been in a long-term downtrend. Both the medium and short-term trends are also down for the stock. It trades well below its 50 and 200-day moving averages. However, in early August this year, the stock registered a 52-week low at ₹433 and found support. The stock has gained 11.6 per cent since then.

There is also an increase in daily volumes at the recent low. The daily indicators show some signs of recovery, while the weekly indicators continue to feature in the bearish zone. That said, the relative strength index in the monthly chart displays positive divergence, indicating trend reversal on the cards. Therefore, downside could be limited in the short term and the stock can continue to trend upwards.

To reinforce the trend reversal, the stock needs to breach the key resistances at ₹500 and ₹564 in the medium term. Next key resistances are pegged at ₹600, ₹650 and ₹700 for the stock. To alter the long-term downtrend, the stock needs to emphatically break above the key barrier at ₹815. Subsequent targets are ₹875 and ₹940. You can consider averaging the stock in dips with a long-term stop-loss at ₹400 levels.

I bought the shares of Lloyd Electric and engineering (LEEL) at ₹250.What is the outlook?

Anu Mammen Cherian

LEEL Electricals (₹185.3): The Lloyd Electric & Engineering has been renamed as LEEL Electricals this May. Significant resistance in the band between ₹330 and ₹340 restricted the stock's rally in October 2016 and again in February 2017.

Since then, the stock has been in an intermediate-term downtrend. In June, it breached a key support at ₹220 and continued to decline. Nevertheless, the stock found support in a long-term base between ₹170 and ₹180 in early August.

Last week, the stock climbed 4 per cent with good volumes; however, the short-term trend continues to be down. Strong break above ₹200 is needed to alter the short-term downtrend. In such a scenario, the stock can revisit ₹220 and ₹250 levels in the medium term. As the downside is limited to ₹170 levels, you can consider averaging the stock with a stop-loss at ₹170. Only an emphatic rally beyond ₹275 will alter the intermediate-term downtrend and take the stock northwards to ₹300 and ₹330 in the long run. Key support below ₹170 are placed at ₹155 and ₹130 levels.

I bought the stock of Gati at ₹134. Please advice.

M N Rao

Gati (₹113.5): The stock of Gati has been in a long-term downtrend ever since recording a new high of ₹341 in November 2014. In August 2016, the it encountered a key resistance at around ₹190 and resumed its downtrend. Since then, the stock has been in an intermediate-term downtrend. However, it now tests a significant long-term support in the band between ₹100 and ₹110, from which it had reversed higher in early 2016. That said, the possibility of an upward reversal from this base zone is bleak as the stock’s downtrend is strengthening.

An emphatic breach of ₹100, which is also a key psychological support level, can reinforce the primary downtrend and drag the stock down to the support levels of ₹85 and ₹70 in the medium to long term. You can consider exiting the stock and buying or averaging at lower levels with a stop-loss at ₹65.

An upward reversal from the current support can take the stock higher to ₹125 initially. Further, break above ₹125 can push the stock northwards to ₹135 and ₹150 levels. Key resistances beyond ₹150 are at ₹165 and ₹190. An emphatic rally beyond ₹220 is required to alter the long-term downtrend and take the stock higher to ₹250 levels.

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Published on August 27, 2017

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