In this kind of environment wherein all sectors closed with a cut, except a couple of them, it's difficult to gather the courage to find long opportunities. In this week alone, the large-cap Nifty 50 index has tumbled over 250 points by now, indicating consistent selling pressure from the top.
However, for perma bulls, there’s one stock that might be able to deliver decent gains in the coming weeks and that is Laurus Labs Ltd (NS:LAUL). It is a pharmaceutical company with a market capitalization of INR 19,639 crore and trades at a TTM P/E ratio of 34.84. Surprisingly, the Nifty Pharma index is one of the only two sectors that closed the session in the green zone, with a 1.04% gain to 15,099.2.
Image Description: Daily chart of Laurus Labs with volume bars at the bottom
Image Source: Investing.com
As the sector strength is there, it might not be a bad idea to go with pharma counters on the long side, hence this stock makes some sense despite a market-wide selling spree that’s been going on for the last 3 sessions.
Shares of Laurus Labs surged 5.42% to INR 384.35 and surged past their hurdle of INR 370 on the daily chart. Currently, the stock is attempting to recover from its bottom and therefore the ongoing rally can lead to high returns on account of mean reversion. Before the stock formed the base around INR 300-odd levels it fell in a one–way fashion.
Such a price action does not create any support levels. This is important to note because as there were no support zones there, the stock won’t likely face any stiff hurdle now on the way up. Simply, there is a concept of support turning into resistance upon penetration, in technical analysis. And because of the absence of the former, the materialization of the latter is less likely.
Looking at the chart, there seems to be a smooth runway ahead for the stock to rally to INR 440. There could be minor hiccups on the way up, but the relative strength of the entire sector coupled with today’s breakout in the counter is sufficient to put this stock on the watchlist of bulls.
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