Cipla, Dr Reddy's Labs: Tech charts show up to 11% upside in pharma stocks

After hitting a new all-time high of Rs 997 earlier today, the stock of Cipla is all set to rally towards Rs 1,100

Led by gains in Divi's Labs, Sun Pharma, Cadila Healthcare and Dr Reddy's Laboratories, the Nifty Pharma pack was trading marginally higher in Wednesday's trade, with most stocks hovering near their all-time high levels.

Shares of Cipla hit a new all-time high of Rs 997 in Wednesday's session, looking poised to enter the four digit-share club after the Drugs Controller General of India (DCGI) permitted the firm to import Moderna's Covid Vaccine with emergency use authorisation in India. READ ABOUT IT HERE

Other pharma stocks like Divi's Laboratories and Dr Reddy were also trading near their all-time highs. While the forme quoted at Rs 4,396 levels, just Rs 30 shy off its record high, the latter was only Rs 80 away from its all-time high level of Rs 5,515. 

Going forward, continued focus on cost optimisation, gross margin improvement, aided by an increase in domestic contribution to the overall mix, and an uptick in contribution from Covid-related opportunities will remain key upside triggers for the stocks in pharma space, analysts at JM Financial said in a recent note.

They added: "Domestic growth, expected to be aided by a low FY21 base, is likely to be a key near-term earnings driver. Incremental pricing pressures in the US could pose downside risks in the near term."

Amid this backdrop, here's what tech charts are signalling for the key names in the pharma space:

Nifty Pharma

Likely target: 14,500 (after breakout 14,700)

Upside potential: 1% (1.50%)

The index needs to decisively conquer the resistance level of 14,500 to see a breakout rally towards 14,700. On the downside, the support comes at 13,933 levels, the index's 50-day moving average (DMA). As long as this support level is upheld, the upside bias is expected to move towards the resistance mark.  CLICK HERE FOR THE CHART

Cipla Ltd (CIPLA)

Likely target: Rs 1,100

Upside potential: 10%

After hitting a new all-time high of Rs 997 earlier today, the stock is all set to rally towards Rs 1,100. The Relative Strength Index (RSI) indicator has crossed the resistance of 60 value, indicating firm underlying strength. The medium-term trend is optimistic as long as the support of Rs 920 is defended. The immediate support is seen at Rs 950 levels, as per the daily chart. CLICK HERE FOR THE CHART

Dr. Reddy's Laboratories Limited (DRREDDY)

Likely target: Rs 5,700 and Rs 5,900

Upside potential: 3.60% and 7%

As the stock has formed a "Golden Cross" pattern, it needs to breakouts above the resistance of the Rs 5,500 mark along with strong volumes to be able to hit Rs 5,700 and Rs 5,900 levels. The overall trend is positive and above the horizontal support of Rs 5,200 levels. The immediate support is at Rs 5,325 levels. CLICK HERE FOR THE CHART

Divi's Laboratories (DIVISLAB)

Likely target: Rs 4,550 and Rs 4,650

Upside potential: 3.50% and 5.50%

The stock is heading towards the all-time high of Rs 4,425, as the Relative Strength Index (RSI)has seen a positive crossover. The immediate support comes at Rs 4,300 and as long as it manages to trade above Rs 4,200 levels, the medium-term trend is highly bullish. The price action is indicating a rally towards Rs 4,550 and Rs 4,650 levels. CLICK HERE FOR THE CHART

Torrent Pharmaceuticals Ltd (TORNTPHARM)

Likely target: Rs 3,250 and Rs, 3350 (above Rs 3,300)

Upside potential: 8% and 11%

This stock has seen a resistance around Rs 3,000 levels. However, the formation of the "Golden Cross" indicates a breakout above this resistance. And, if the counter manages to cross the resistance, the rally towards Rs 3,450 and Rs 3,600 cannot be ruled out, as per the daily chart. The immediate support comes at Rs 2,850 and Rs 2,800 levels. CLICK HERE FOR THE CHART

Sun Pharmaceutical Industries Ltd (SUNPHARMA)

Likely target: Rs 690

Upside potential: 2%

This stock needs to decisively cross the resistance of Rs 690 levels to build a positive bias. The current momentum shows positivity, which could help the stock conquer the said resistance. The Moving Average Convergence Divergence (MACD) is also attempting to cross the zero line, which it breached few sessions ago. This move shows a build-up of positive momentum and may see addition if the volume supports the trend. The immediate support comes at Rs 665 levels. CLICK HERE FOR THE CHART