Technical Analysis

Tech query: Cipla on a short-term downtrend

Yoganand D | Updated on March 06, 2021

What are the prospects for Cipla and Radico Khaitan stocks for the next one year?

Pradeep Kabra

Cipla (₹805.4): The stock of Cipla is on an uptrend in the long as well as the medium term. However, in the short term, the stock has been on a downtrend since it recorded a new high of ₹878 in early February this year.

In March 2020, it took support at ₹356 and reversed direction. Since then, the stock has been on a long-term uptrend. In April 2020, it decisively breached a key hurdle at ₹480 and thereafter at ₹560, and has never revisited these levels since then.

The stock continued to trend upwards. In November 2020, the stock took support at around ₹710 and continued to trend upwards. But then, it met with a key barrier at ₹860 in early January and again in early February this year, and started to trend downwards.

A rally above the immediate resistance level of ₹820 can take the stock higher to ₹840 and then to ₹860 levels. An emphatic break above ₹860 is needed to take the stock higher to ₹880 and then to ₹900 over the medium-to-long term. On the downside, if it falls below the key support level of ₹760, it can strengthen the ongoing downtrend and pull the stock down to ₹740 and then to ₹710 levels.

A fall below ₹710 will be a threat to the medium-term uptrend and pull the stock down to ₹660 and then to ₹630 over the medium term.

Investors with a long-term perspective can stay invested with a stop-loss at ₹560 levels.

Radico Khaitan (₹588.4): The stock of Radico Khaitan is on an uptrend across all time-frames — long, medium and short term. But after recording a new high at ₹628.3 last week, it started to decline, triggered by negative divergence in the daily relative strength index.

On Friday, the stock tumbled 4.6 and moved below ₹600 levels. An immediate support is at ₹560. A fall below this base can weaken the short-term uptrend and pull the stock down to ₹520 or ₹500 levels.

The next key support is at ₹470. A further decline below ₹470 will alter the medium-term uptrend and pull the stock down to ₹440 or even to ₹400 levels.

A conclusive break above ₹620 is needed to reinforce the bullish momentum and take the stock northwards to ₹650 and then to ₹700 over the long term.

Investors with a long-term horizon can stay invested as long as the stock trades above ₹400 levels with a stop-loss at ₹390. That said, a fall below ₹400 will mitigate the uptrend and pull the stock down to ₹360 and then to ₹320 levels.

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Published on March 06, 2021
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