Incorporated in 1990, Divis Laboratories is among the top pharmaceutical companies in India. It specializes in the manufacture and sale of active pharmaceutical ingredients (APIs) in the Indian and international markets. Ranked by market capitalization, it’s the fourth-largest publicly listed pharmaceutical company in India.
But should this pharma stock be on your radar?
Let’s look at the charts to find out.
Monthly: Trendline
For the past 20 years, the stock has been in a bullish trend. Moreover, after every correction it has held onto this trendline support. Although it has fallen to the trendline support, the most recent correction has certainly brought it closer to the trendline.
Weekly: Price Action
We have established that the stock has been in an overall positive trend since the very beginning. Plus, after every significant correction, it has shown a pattern of rebounding and continuing the upward trajectory. It is displaying the same behaviour after the most recent 1.4 year correction.
This resilience and ability to recover after downturns highlight the strength and positive momentum of the counter.
Weekly: Patterns
We see a massive curve formation developing on the weekly chart. The downtrend that began in October 2021 reversed its course in April 2023 and has since entered an upward channel. As it continues to make higher tops and higher bottoms, every support could be a good buying opportunity.
Weekly: Fibonacci Extension
Since the counter is making higher highs and higher lows, we could watch for the 1 and 1.618 Fibonacci ratios. These ratios fall near the 4300 and 4800 levels which could be the next possible top for the counter. Considering the curve formative on the previous chart, a steady ascent is expected from here.
Weekly: RSI & MACD
I
n the past year, the RSI (Relative Strength Index) has risen from the extreme bottom. It has maintained a position either above or closely below the halfway mark. This sustained position suggests that the counter has been displaying good strength.
The lagging indicator MACD has stayed above the zero line for a significant period of time. A bullish crossover from hereon will only add more strength to the counter.
Given that the stock is currently at a support level, the indicators may not exhibit maximum strength. However, they do reassure that Divis Lab presents a favourable opportunity for bargain buying.
Weekly: Ichimoku
The Ichimoku indicator provides a view of trend direction and momentum in a single glance. The Tenkan-Kijun crossover on the chart indicates a robust momentum. Additionally, the price is also above the green, positive cloud.
Daily: Price Action
As stated earlier, the stock has seen a correction of almost 50% since October 2021. However, we have also seen a notable shift post that. The stock has been forming higher highs and higher lows, suggesting a continuation of this positive movement in the future.
Daily: Pattern
We saw the counter entering an upward channel after making a double bottom in the beginning of 2023. After the most recent minor correction, it is available to buy at support prices.
15 Mins: Falling Wedge
On the shorter time frame, we see a clear breakout of the bullish falling wedge pattern. This suggests that there might be no further downside as of now. This could be a chance to benefit from an upcoming positive trend with a favourable risk-reward ratio for those looking to buy.
Putting it All Together:
Taking all factors into account, Divis Laboratories presents itself after a substantial correction. It is now available at a bargain buying level. With the charts and patterns showing a positive future and a potentially sizable upside it sure seems like an attractive investment opportunity.
Statutory Disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that our personal position, our fund’s position, our clients’ positions may be open on the counter. Prefer to take the advice of your financial advisor before initiating any position.
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This blog is written by Natasha Dedhia, under the guidance of Kunal Rambhia.
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