Do you own Pharma stocks? Nifty Pharma shows an alarming sign you should be worried about!
Nifty Pharma has witnessed a strong sell-off in recent weeks, falling about 22% from its all-time high of 14938.
Nifty Pharma plunged nearly 2% in Friday’s trading session and is one of the top underperforming sectors along with Nifty IT. The index has witnessed a strong sell-off in recent weeks, plunging about 22% from its all-time high of 14938. What’s more disappointing is that it has entered the bear market (>20% fall from its all-time high). Moreover, it is below its 20-DMA by over 5% and 13% below its 200-DMA. Last week, it broke its swing low and has plunged below the 12000-mark. On a YTD basis, the index has slipped over 16%. This pretty much sums up the disaster that the index is into.
But this is not the worst. The alarming picture is that the index is approaching its 65-week long inverse cup pattern. The breakdown level of this pattern is at Rs 11280 and any fall below this level can trigger a fresh short position being created. The index can then very well see the levels of 10000 and below. The last four weeks have seen the index plummeting about 10% and sell-off getting aggravated.
Moreover, the 14-period weekly RSI (33.03) is in the bearish zone. The weekly MACD has a negative histogram, suggesting a strong downtrend. Moreover, the -DMI is above the +DMI and ADX (21.56) indicates strong downtrend strength. The Elder Impulse System, KST and TSI are all bearish. The GMMA indicators also suggest bearishness. The index is already at a 52-week low, and more downfall is expected.
Given the current scenario, the pharma stocks are expected to underperform. The global recession looming in future is expected to have a strong negative effect on the earnings of pharmaceutical companies. It is better to use the strategy of “sell-on rise”. Any technical bounce should be used as an opportunity to offload the shares to avoid more loss. Meanwhile, traders are requested to maintain a cautious stance on this sector for the short to medium term.
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