Do you own Pharma stocks? Nifty Pharma shows an alarming sign you should be worried about!

Do you own Pharma stocks? Nifty Pharma shows an alarming sign you should be worried about!

by 5paisa Research Team Last Updated: 2022-06-17T13:06:29+05:30

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.


Start Investing in 5 mins*

Get Benefits worth 2100* | Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.

Open Free Demat Account

& get benefits worth 2100*

 
Resend OTP
Please Enter OTP
  • Have Promo code?
  • Use code ACT2100
Enter Promo code

By proceeding, you agree to the T&C.

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number