SunPharma Inds : Multiple Bullish Trigger on Long Term Chart...
The Pharma Stocks are back in momentum after staying sideways for a couple of weeks after the decent rally from the lows. Last year Pharma sector was one that showed strength when the Benchmark index and other broader markets were facing the heat. Going ahead I believe this sector will continue to outperform the benchmark index and continue to witness strength. However, for this week, the stock I have chosen from this space is SunPharma, based on the different Technical studies which we shall discuss ahead.
The first chart shown below is the weekly chart of SunPharma which shows the stock was trading in Descending parallel channel for last more than 3 and half year and this year stock witnessed a breakout from the prolonged descending channel which is a bullish signal for a medium-term trend. Post the breakout price has been consolidating near the upper channel line and constantly finding support near the same. Also, recently price registered breakout from multi-week consolidation pattern which is a bullish sign for short-term trend and hints at resumption in prior trend.
From the above chart, it is evident that there is a Golden Crossover in the Moving Averages which adds further confirmation and increases the reliability of the breakout. The Golden Crossover has been witnessed after a good amount of time which is a bullish signal for a medium-term trend and indicates strength and momentum in the stock trend.
After analyzing the Absolute price charts I did some further studies in the Relative Chart of Nifty Pharma and Sunpharma to get more confidence over the analyses. The Relative charts are in line with the Absolute price chart and signalling strength in the overall pharma sector and Sunpharma which have been shared below.
The chart shown below is the Relative chart of NiftyPharma and Nifty, the relative helps us to understand the strength in the underlying sector compared to the Benchmark index. As stated earlier Pharma sector was the one which showed the strength when Index was facing the heat and from the chart, we can observe the same. The relative chart shows that probably it has completed wave 2 recently and has entered into wave 3. Initially, wave 3 has more leg to complete from hereon which indicates the outperformance of the Nifty Pharma likely to continue ahead if this analysis unfolds on the expected lines.
The Relative chart of SunPharma/NiftyPharma highlights that ratio was trading into the descending channel from last more than 6 years and recently its has registered breakout from the prolonged descending channel which is bullish signal for medium-term trend and signals henceforth, SunPharma is likely to outperform the NiftyPharma which was not the case since last many years.
Thus from the above Technical studies, I believe the Pharma sector shall continue to show momentum and strength in the coming weeks and months. And SunPharma aswell shall do well and likely outperform the Nifty Pharma and Benchmark Index in weeks to come. Going ahead if the view unfolds as per the expectations, the stock has the potential to scale higher to test 715-777-850 in the short to medium run. On the downside, the support is placed around 620-585 levels.
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