Top/Down Take: Dr.Reddy's (DRREDDY)

JC Parets
June 11, 2021

We're back to share with you, what we love to do and that is the Top/Down approach. At All Star Charts we're big fans of the weight of the evidence. The market tells us where it's going, and we listen. It's pretty simple really.

For some time now, the Pharma sector has been displaying strength. Resistances have been breached, momentum indicators have been strong, and rallies have been swift.

So what do the charts say this time around? Let's take a look!

As the name suggests, the Top/Down approach means that we zoom out first. Every subsequent step then involves some zooming in to do!

As always, we start at the index level. Here is our universe Nifty 500. Week-on-week we've seen the index mark a new all-time high and this week has been no different!

From current levels, the target we're tracking is 16,040 with 12,260 acting as the risk management level.

Now let's zoom in a little.

Nifty Pharma here has moved higher, with momentum by its side. The index seemed like it was slowing down after crossing the resistance of 13,500. With the strong move coming through this week, Pharma continues to be one of the outperformers in the market.

We are bullish above 13,500 with a target near 18,000.

So we know what Pharma is doing on an absolute basis. But what is the trend like on a relative basis?

Well, the index is bouncing off its support as it looks ready to rally. The sideways move in the index after the breakout raised doubts over the breakout. But with the resumption n trend, it seems like Pharma has more steam left.

What is the next step? To identify the stock, of course!

This week, Dr.Reddy's marked an all-time high on the basis of its weekly close. With this move, the stock has emerged out of its consolidation as its challenges its overhead resistance.

The index is headed towards the bullish momentum territory and the price broke out with a strong bullish candlestick.

We are positive above the level of 5,450 with a target near 6,180.

Here's Dr. Reddy's on a relative basis. The stock bounced off a historically significant level in the recent past. This particular support holding its ground bodes well as a signal. When the price was undergoing a correction post the high made in January 2021, the price halted at exactly this level and moved higher.

When you look at the price chart in tandem with the relative strength chart, the importance of the bounce-back level comes through.

Pharma has been performing quite well for more than a year. It does seem like that trend will continue for now.

With Nifty 50 moving higher every week and large-caps joining in on the market rally Dr.Reddy may be at the cusp of a big move!

Thanks for reading and please let us know if you have any questions!

Allstarcharts Team

Filed Under: