Book profit in Dr Reddy's Labs

B. Krishnakumar

THE market sentiment remained lacklustre during the week with the Sensex confined to a narrow range. The firm trend in the recent weeks had pushed the Sensex to the top of the upward cycle.

With correction being overdue, the Sensex declined by about 2 per cent on Friday. On the downside, the Sensex could seek support in the 3840-3900 range. The near term market trend hinges on the ability of the Sensex to remain afloat above 3800.

A close below 3800 level would indicate that the Sensex would be vulnerable to a decline below the previous bottom of 3492. Given that the Sensex has reached the top of the current upward cycle, it would be safer to book profit in index heavy-weights.

Fresh exposures in index-stocks may be contemplated if the Sensex manages to hold above the 3800 level. The focus this week is on Dr Reddy's Laboratories and Himachal Futuristic. The outlook for both these stocks does not appear all that positive.

Dr Reddy's: As mentioned a few weeks back, the share price of Dr Reddy's Laboratories managed to move past the Rs 1,450-mark mentioned earlier.

It touched a high of Rs 1,595 and turned weak thereafter. Existing holders could book profit. Aggressive traders could contemplate short positions with a stop-loss at around Rs 1,590-level.

Himachal Futuristic: Similar to Dr Reddy's, the share price of Himachal Futuristic too could head to lower levels. The scrip has reversed direction at a key fiboacci resistance level of Rs 1,384.

Existing holders could, therefore, cut exposures in the stock. Very aggressive traders could also contemplate short positions with a stop-loss at around the Rs 1,380-level. Fresh long exposures may be avoided for the time being.

Recommendation follow-up

The price action in Dabur India, Reliance Industries and PentaMedia Graphics was broadly on course with the recommendations given a couple of weeks ago. The share price of Dabur India ruled weak and touched a low of Rs 610 on October 31. It has since been on a recovery path. As the stock continues to be on a short-term downtrend, existing holders could cut exposure and book profit.

As expected, Reliance Industries reversed direction after moving to the Rs 318-level. After touching a high of Rs 320.8, the scrip receded to a low of Rs 310. The outlook for the scrip continues to remain subdued and a price rally ought to be viewed as an opportunity to book profit. The trend in the stock would continue to remain subdued as long as it remains below Rs 334. Aggressive traders could contemplate short positions with a stop-loss at or above Rs f334.

In tune with expectations, the PentaMedia Graphics stock managed to rule firm. It also moved past the price objective of Rs 380 mentioned a couple of weeks ago. As the scrip has reached the top of the current upward cycle, existing holders could book profit. Fresh short positions may also be contemplated with a stop-loss at or above Rs 387.

(Note: Recommendations in this column are based entirely on technical analysis of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)