CNX Pharma Index Outlook

CNX Pharma has rallied from 4400 - 7200 odd levels in past 3 years and has relatively out performed the benchmark indices CNX NIFTY.

                                         
                                           CNX Pharma v/s CNX NIFTY ratio Analysis

                                                         CNX Pharma Daily chart

In past 20 trading session index has rallied from 6400 - 7300 odd levels. Almost a 15% rally in the index. From past few trading sessions index is indicating a distribution pattern also same is witnessed in the major stocks. A divergence in the short term EMA's along with the negative divergence in MACD and price distribution is witnessed on the index. Fundamentally also most of the stocks in the index are over priced compartively to thier P/E's. So a healthy retracement of 8 - 10% can be seen in an healthcare index on a break below 7200 odd levels to 6800 break below can lead to further downside which is of still far as of now.

Sun Pharma, Dr. Reddy Laboratories, Cipla and Lupin are the major counters in the index market cap wise. Most of these entities are showing signs of exhaustion at higher levels.

                                                 Dr. Reddy's Laboratories Daily Chart

A 33% rally from 1766 - 2350 in Dr. Reddy labs from past 4 months is seen. Dr. Reddy Laboratories has formed a twezeer top formations on daily candlestick charts and unable to cross 2350 on closing basis from past 7 trading sessions is showing signs of exhaustion.

A sign of weakness is indicated by inability to cross higher channels of bollinger bands, MACD and RSI divergence and distribution pattern. So Long traders can exit their longs at current levels and enter and lower levels. One can short the counter from current levels up to 2380 odd levels with an sl of 2410 for targets of 2200. A close below 2300 will confirm more downside in the entity.

Key support and resistance to watch out for the stock:

Support - 2302/ 2200/ 2100

Resistance - 2350/ 2365/ 2400

                                                     Sun Pharma Daily Chart

Sun Pharma also in a distribution phase has rallied from 400 - 1130  odd levels in past 3 odd years. the stock has been one of the  out performers. A break of short term trendline has confirmed atleast an intermediate correction or profit booking in process. Investors in the entity can book profits and come out of the stock at current levels to enter at lower levels.  The technical indicators are also showing weakness, inability to cross the higher channel of bollinger bands, MACD and RSI divergence along with price confirmation below 1100 will ignite the downside move. So short traders can short the stock at current levels up to 1110 levels.

Support - 1000/ 940

Resistance - 1110/ 1148

                                                       Lupin Daily Chart

Lupin has rallied from 600 - 900 odd levels in 89 trading sessions a fibonacci series completing the up move. The stock has given a return of 50%  in past 4.5 months. A negative divergence in RSI , MACD, unable to cross higher end of bollinger band channel and distribution in price an healthy correction is anticipated on the verge of booking profits. So investors can book profits and enter at lower levels. short traders can short the stock around 895 - 898 odd levels with stop loss of 911 for targets of 850 and 800.

Support - 850/ 800

Resistance - 898/ 910

Trade objectively and wisely with the consideration of own risk with amid volatility. The strategy would be to wait patiently for the right opportunity to unfold to probable profitable trade setups.

Raju V Angadi

Equity Research Analyst

 To know more about probable counts contact us back on rvangadi@googlemail.com 

Disclaimer: This is just an view based on the research of individual for educational purpose. So kindly trade along with the consultation of your financial adviser, market trends, price action and own risk appetite considered while investing or trading in stock markets.