Assessing Glenmark Pharma's Health
Let's start with a weekly chart of Glenmark Pharma, which recently confirmed a failed breakdown and bullish momentum divergence by reclaiming long-term support at 260. This has been a major level of support for about a decade and a whipsaw below it has shaken out longs, sucked in shorts, and now left them both with losses.
Click on chart to enlarge view.
From a structural perspective, there is absolutely no reason to be short if prices are above 260. Above that level, buyers are in control and this trend reversal has merit.
Moving down to the daily timeframe, we see prices running into the downward-sloping 200-day moving average. Given the sharp snapback, we'd expect a range to develop between 270 and 375.
The direction in which that range ultimately breaks will determine whether this trend reversal is successful or not. So far we've transitioned from down to sideways, but now we need to see higher highs and higher lows form to confirm a new uptrend.
That can't be expected to happen overnight, so this is a good first step and we'll watch to see how it develops from here.
On a relative basis we're seeing a similar counter-trend rally, however, prices are still stuck below long-term resistance near 0.032. Until prices get back above that level for several weeks, there's little reason to expect Glenmark to outperform its Mid-Cap peers or the Nifty Pharma Index.
While we remain positive on the Pharma sector, we are negative on stocks as an asset class. For now, the best trade in Glenmark Pharma for those with an intermediate or long-term timeframe is no trade.
On an absolute basis the bias is higher if it's above 260, but we'd prefer other stocks in the sector that have stronger absolute and relative trends.
Thanks for reading and let us know if you have any questions.
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Allstarcharts Team