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Technical Check: After forming a double bottom pattern Divi’s Laboratories eyes 20% upside in next 6-9 months
Divi’s Laboratories Ltd has risen nearly 30 per cent in the last one year compared to 20 per cent upside seen in the Nifty50 in the same period, and the technical charts suggest that momentum is likely to continue
Divi’s Laboratories Ltd has risen nearly 30 per cent in the last one year compared to 20 per cent upside seen in the Nifty50 in the same period, and the technical charts suggest that momentum is likely to continue.
The pharma stock with a market capitalization of more than Rs 1.18 lakh cr hit a 52-week high of Rs 5425 back in October 2021 and since then the trend went sideways.
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Divis Laboratories Ltd is engaged in manufacturing of Advanced Pharmaceutical Ingredients (APIs), Intermediates and Nutraceutical ingredients with predominance in exports.
It has a market presence in 95 countries and ~14,000 employees and is one of the leading pharmaceutical companies in the world. The company derives ~47% of total revenues from the top 5 products.
The stock has rallied nearly 13 per cent in last one month which pushed the stock to help breakout from the resistance levels.
The recent price action helped the stock to breakout from the neckline of a double bottom pattern which supports bullish sentiment. It gives a target of Rs 5300 in the next 6-9 months which translates into an upside of over 22 per cent from Rs 4327 recorded on 24 March, according to experts.
A breakout does give comfort to the bulls but 100 and 200-DMA will act as still resistance on the upside. The stock is trading above 30, and 50-DMA but below 100-DMA placed at 4507, and 200-DMA placed at 4673, according to data from Trendlyne.
The stock price hit an all-time high of 5425 in the month of October last year and since then has been in a downtrend. In January this year, it hit a low of 3788 and then bounced back to touch a high of 4520.
“Last month stock tested the Jan low and formed a higher low. Thus, forming a bullish double bottom pattern after a major decline on the daily chart. The price crossed the neckline and gave a breakout from the pattern,” Ashish Chaturmohta, Director, Equity Research, Sanctum Wealth, said.
“The moving average convergence and divergence line has moved above equilibrium level of zero and trending higher on the daily chart indicating a reversal in trend,” he added.
Chaturmohta recommends investors to buy the stock at current levels and on dips to 4460 with a stop loss of 4300 for the target of 5300 in the coming 6-9 months.
(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)
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