Flag Breakout: Stock Resumes Rally, Shows 16% Upside!

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A bit of profit booking has been seen in the markets by 10:50 AM IST, but still, there is no dearth of stock-specific action. Another breakout stock for the session, that investors might want to keep on their watchlist is from the pharma space - Jubilant Pharmova Limited (NS: JUBA ).  

It is a smallcap pharma company with a market capitalization of INR 6,048 crores and currently trades at a P/E ratio of 14.61, compared to the industry’s average of 35.64, making it decently undervalued. In fact, larger peers such as Sun Pharmaceuticals Limited (NS: SUN ) and Torrent Pharma (NS: TORP ) are quoting at a P/E ratio of 74.61 and 70.94, respectively. 

The pharma sector is the second-best performing space in today’s session so far, after PSU banks. The Nifty Pharma index is up 0.63% to 12,806, by 10:59 AM IST, with the majority of the gains coming in from Sun Pharmaceuticals but small-cap Jubilant Pharmova is looking more attractive on the charts.

Image Description: Daily chart of Jubilant Pharmova with volume bars at the bottom

Image Source: Investing.com 

Without a doubt, it’s one of the most beaten-down counters in this space, with one year return of a negative 35%, but that is what’s providing it a very good risk-to-reward ratio. The stock started a one-way rally in the last ten days of October 2022, after which it turned sideways, an expected behavior after a sharp rally. The rally coupled with the consolidation phase for the next entire month resulted in the formation of a bullish Flag which is a trend continuation pattern. 

As the consolidation got over today, the stock rose above the upper resistance of the range, gaining 4.47% to INR 406, resulting in the resumption of the prior rally, especially considering the fact that the entire pharma space is on the move. This is the same scenario that is currently playing out in the PSU banks and most of the stocks are going bonkers, all thanks to a sudden spurt in the interest in this sector. 

Coming, back to the Flag pattern, the stock might be heading towards the nearest level of around INR 470 - INR 475 and it does not seem to be a big task as it’s already trading at quite a lower level. The lower end of the range, i.e. INR 368 to INR 370 would provide the stock a good support in case the tide turns. A minor retracement till INR 395 could come and might be an ideal zone to capitalize on the rally.

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  • namami ghosh @namami ghosh
    excellent example of a flag continuation pattern captured by Guruji ... I, for one, am going bonkers over Guruji's posts :D
    Like 2
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      So sweet!
      Like 1
    • Piyush Lapsiwala @Piyush Lapsiwala
      Great find Sir जी..
      Like 0
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