Last Updated on Nov 22, 2022 by
Wonderful time in the market. We are witnessing the stock-specific movement, which will likely continue. It would absolutely make sense to keep this strategy in mind because the index is reaching near the highs. Today, I shared one more counter, which is from the pharmaceutical segment, Strides Pharma, offering the best risk-reward and available at a huge discount.
Let’s dive deep into the different time frame charts and understand the observations.
Table of Contents
Monthly: Price action
Look at the chart from 2000. The zone highlighted on the chart was a resistance zone until 2014. After 2014, the price crossed the resistance zone on the higher side and made a new debut on the upside. The extremely volatile count reached the 1300 mark, returned to the scene zone, and found a support area. It’s the third time the same zone is acting as the sport. This polarity change makes the counter more attractive from a favourable risk-reward ratio.
Weekly: Price and volume action
Historically, extreme volumes were noticed when the price reached the support zone highlighted with the trendline. The volumes are again picking up near the same zone, making the counter more attractive.
Weekly: Price and Fibonacci
If we look at the entire advance from 2019 to 2015, the rally was quite steep. Price correction was really severe but exactly halted at 78.6% of the retracement of Fibonacci. Multiple times, it halted at the same level, making that zone very important. Even if someone wishes to buy without breaking out, this zone seems the best zone to accumulate the counter.
Monthly: Price and RSI
Relative Strength Index (RSI) is a momentum indicator. We can see that the price reached the same zone as a swing before, but RSI is making a higher bottom compared to the previous swing low. This is creating a bullish divergence on the RSI. The stock will be good to go with a consolidation breakout on the chart.
Weekly: Price pattern
Along with bullish RSI divergence, we can see price in sideways consolidation. But proper plotting of trendlines highlights inverse head and shoulders formation, which is well supported by volumes. Momentum traders should wait for the breakout as the first sign to trade bullish on the counter.
Moving Average Convergence/Divergence (MACD) is a lagging indicator and confirms the trend. But this indicator can be seen in multiple ways. Interestingly, MACD made an extreme low below 2015 lows. It started growing when the price was in sideways consolidation. This is making a bullish divergence. This divergence coincides with the MACD crossover right near the low. Once MACD crosses the zero line on the upside, all observations on the indicators will show a thumbs up!
Ichimoku is a very advanced indicator. I consider this indicator to be one of the best for trend following. So far, all the signs on the indicator are negative. The recent bounce of the price exactly halted at Kumo cloud. Once the price enters the cloud, it will challenge the further downside and will be the first sign of trend reversal.
It is a trending indicator and offers good support/resistance during the ongoing rally. The best part of the indicator is its simplicity. A single line without any noise. Very clearly, the price has respected this indicator most of the time. Present resistance is right on the chart. Above super trend, it’s a thumbs up for longs.
Weekly ratio chart: Strides v/s Aarti Drugs
Based on business models, firstly comparing the counter with Aarti Drugs. A very clear underperformance is seen on the chart. But at the same time, the ratio chart is in sideways consolidation for 1.5 yrs, forming (kind of) a falling wedge and raising hopes of a bounce. So Strides Pharma may outperform on the breakout.
Weekly: Ratio chart: Strides Pharma v/s Abbott India
On comparing the counter with Abbott India, the chart is almost similar. Clear underperformance of the counter, but raising hopes due to good support and consolidation near the low. Outperformance is likely on the breakout.
Weekly: Ratio Chart: Strides Pharma v/s Advanced Enzymes
This chart is interesting. The ratio chart goes sideways, continues the range, and enters the new range. As of now, it has bounced from the extreme lows, confirming the outperformance of Strides Pharma, but one needs to keep an eye on whether support remains intact. If so, it’s a perfect strength status of Strides Pharma over Advanced Enzymes.
Putting it all together
Looking at monthly charts, price actions, price patterns, weekly charts with Fibonacci, MACD, RSI, Super trend, Ichimoku and various ratio charts, it seems that the downside for the counter is very less and one can certainly think of accumulating from the long-term perspective or wait for a breakout to take up momentum trade. Risk reward seems pretty favourable for longs.
Statutory disclosure: Kindly note that this update is only for educational purpose. It is safe to assume that my personal position, my fund’s position, my client’s position and my relative’s position may be open in the counter. Prefer to take the advice of your financial advisor before initiating any position.
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