Inverse H&S in pharma index could revive a positive bias for short-term

Pharma shares like Aurobindo Pharma, Zydus Lifesciences, Sun Pharmaceutical Industries Ltd, Glenmark Pharmaceuticals may rise up to 14 per cent.

Shares of pharmaceutical companies to remain in spotlight following the index broke out of the “Inverse Head and Shoulder” pattern. While the broad trend bares weakness, the current formation may provide some respite. 

Aurobindo Pharma, for instant, has conquered the key indicator, the 200-day moving average after August 2021. Zydus Lifesciences shares have gradually raising upward, with no impact of the overall stock market trend. Divi's Laboratories and Glenmark Pharmaceuticals are both firmly holding their fort over the 200-DMA. 

Shares of NATCO Pharma soared over 2 per cent, while Glenmark Pharmaceuticals and Divi's Laboratories gained 1.74 per cent and 1.20 per cent, respectively, in comparison to the benchmark indices, which slipped close to 0.25 per cent. 

Here’s the technical outlook of pharma stock post bullish breakout of the index:-

Nifty Pharm

Likely target: 12,200

Upside potential:  2.90%

While there is negative sentiment of a “Death Cross”, the index is attempting to fade this bias by forming a bullish breakout of an “Inverse Head and Shoulder” pattern. The technical oscillator, Relative Strength Index (RSI) has risen over the oversold territory, with index movement supporting the upward bias. 

Thus, unless the index falls beneath 11,600-mark, the key support of the said pattern, the positive rally may head in the direction of 12,200 levels, its horizontal resistance, as per the daily chart. CLICK HERE FOR THE CHART

Aurobindo Pharma Ltd (AUROPHARMA)

Likely target: Rs 540 and Rs 560

Upside potential:  8% to 12%

A move over the 200-DMA, set at Rs 592, after almost two years, reveals a robust underlying trend. If the stock manages to hold breadth over the same, the short-to-medium term trend for Aurobindo Pharma shares may see a bullish shift. 

Although, the RSI has entered the overbought territory, the price action is not letting bears to over the control. The counter could rally to Rs 540 and Rs 560 levels.  CLICK HERE FOR THE CHART

Zydus Lifesciences Ltd (ZYDUSLIFE)

Likely target: Rs 540

Upside potential:  12%

Shares of Zydus Lifesciences are trading near the 52-week of Rs 488.30, with no signs of an exhaustion pattern. Until the support of Rs 450 is maintained, its 100-weekly moving average (WMA), the bulls shall aim at higher levels of Rs 540.

There is a “Golden Cross” formation, which is in the developing stage, may further strengthen the upward bias. A breakout of the “Golden Cross” could spark a resilient rally in the counter.  CLICK HERE FOR THE CHART

Sun Pharmaceutical Industries Ltd (SUNPHARMA) 

Likely target: Rs 1,100

Upside potential: 12%

Sun Pharmaceutical Industries is another stock that is holding the bullish stance by trading close to its all-time high. The stock is poised for a breakout over the Rs 1,000 mark, and if succeeds, then a rally towards new historic high cannot be ruled out. 

As long as the stock trades over Rs 940, the medium-term trend could eye higher level of Rs 1,100. The momentum indicator, the Moving Average Convergence Divergence (MACD) has formed a positive crossover, with intention to rally above the zero line. When this happens, the momentum could largely favour bulls. CLICK HERE FOR THE CHART

Glenmark Pharmaceuticals (GLENMARK)

Likely target: Rs 525

Upside potential:  14%

Shares of Glenmark Pharmaceuticals have hurdle in the range of Rs 460 to Rs 450 levels. The stock is attempting to absorb all the selling pressure emerging in this range since November last year, but all efforts so far have remained futile. 

Once this hurdle range is cleared, the stock shall resume its bull-run and see climbing higher level of Rs 525. The closing basis support exists at Rs 414 level. CLICK HERE FOR THE CHART