Technical Analysis

Aurobindo Pharma continues to trend down

Yoganand D | Updated on June 23, 2019 Published on June 23, 2019

To alter the medium-term decline, the stock needs to conclusively break above ₹725


Here are answers to readers’ queries on the performance of their stock holdings.

I bought and averaged shares of Aurobindo Pharma and my average holding cost is ₹730. Now that the price has come down to ₹600 levels, can I buy and average at these levels or exit at loss? What is the outlook for this stock?

I have also bought YES Bank at ₹157. As it has come down, should I average?

K. Anand, Ramachandran

Aurobindo Pharma (₹602.3): Following a strong rally in 2014 and 2015, the stock of Aurobindo Pharma encountered resistance at ₹890 (price adjusted) in January 2016. Since then, it has been in a broad sideways consolidation phase in a wide range between ₹550 and ₹830. The upper boundary limited the upside in late 2018.



After testing resistance at ₹830 this April, the stock began to decline, witnessing selling interest. Since then, it has been in a medium-term downtrend within the broad sideways consolidation phase. While trending down, the stock had decisively breached the 50- and 200-day moving averages in April and continues to hover well below them. Short-term trend is also down for the stock. On Friday, the stock tumbled almost 4 per cent, accompanied by above-average volumes, breaking below a key support at ₹625.

The stock now tests the next support at ₹600. The daily relative strength index and price rate of change indicator show signs of positive divergence, indicating that trend reversal is likely. But a strong rise above ₹650 is needed for confirmation. The weekly indicators and oscillators continue to feature in the negative territory, backing the downtrend. Investors should, therefore, tread with caution.

A strong decline below ₹600 can drag the stock to ₹550, which is the lower boundary. The long-term support in the band between ₹530 and ₹550 can provide base for the stock. You can consider averaging the stockon declines with a stop-loss at ₹515. An upward reversal from the key long-term support band can take it higher to ₹650. A further rally above ₹650 can push the stock up to ₹700 and ₹725. To alter the medium-term downtrend, the stock needs to conclusively break above ₹725. Such a break can take the stock northwards to ₹770 and ₹800 levels. Next key resistances are at ₹830 and ₹850.

YES Bank (₹109.5): Since registering a new high at ₹404 in August 2018, the stock of YES Bank has been in a long-term downtrend. While trending down, it had decisively breached key supports at ₹300 and ₹175. Medium as well as short-term trends are down. The stock trades well below the 50- as well as 200-day moving averages. However, it began to trend up slightly after recording a 52-week low at ₹98.75 last week.



The daily relative strength index shows positive divergence, signalling that a trend reversal is on the cards. But a strong rally above ₹150 is needed for confirmation. Such a rally will also alter the short-term downtrend and take the stock up to ₹170. Next resistances are at ₹200 and ₹225.

To alter the medium-term downtrend, the stock needs to decisively move above ₹225 levels. Ensuing targets are ₹250 and ₹280 levels. On the other hand, a strong fall below ₹98 can drag the stock down to ₹90 and ₹85 levels.

You can wait for a trend reversal and consider averaging on a strong rally above the immediate resistance level of ₹130 with a stop-loss at ₹100.

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