Applying Time Cycles -Sun Pharma gets approval from USFDA but is it already discounted?

The Pharma sector has been moving in doldrums from last one year. Due to USFDA quality issues companies such as Sun Pharma, Lupin, Dr.Reddy, Cipla etc. has shown sharp down move. Lead by this Pharma sector is underperforming from last one year. However, after many months some good news is here where Sun Pharma has got approval for eye inflammation drug recently. The stock reaction in today’ session is neutral where prices are consolidating between the range. Now question arises will stock show trending move in next few days and if yes then in which direction? We believe that news only creates short term spikes but post which trend should start in the direction of ongoing move. So what to expect next for Sun Pharma? Below part of research is taken from today’s “The Financial Waves Short Term Update”:

Sun Pharma weekly chart:

(Part of research taken from today’s research report)

Wave analysis:

Since the start of 2015, Pharma index has continued to move in down trend. This sector was outperforming prior to 2015. However, now the story has changed as underperformance has continued from last 1 year. In previous month when recovery was witnessed broader indices, Pharma sector continued to tumble and lost more than 12%. We have picked up Sun Pharma which has reversed on downside from the crucial channel resistance.

The above weekly chart indicates that prices are intact in downward moving channel and forming negative bars. 20 weeks Exponential moving average has continued to sustain below 50 weeks EMA which indicates weakness. Moreover 26 weeks Time Cycle has been working well to capture the tops. Same cycle is due now which indicates that one should remain cautious as prices can move lower sharply. From medium term perspective, stock has important resistance at 900 levels.

In short, Sun Pharma structure is weak. Any move ………….

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RANBAXY tumbled by 20%: USFDA concerns but we were expecting the fall!

The below research article is from the daily report "The Financial Waves short term update" by Waves Strategy Advisors. To subscribe to this report that has Nifty and 3 different stocks on daily basis click here Pricing Page

Ranbaxy is the one of the stocks from Pharma sector which often comes in the news media due to its USFDA worries.

Every time whenever prices fell, the justification of the fall was associated with its USFDA issues. 

In the today’s morning session stock was down by 20% and now you may have heard the following news: The US Food and Drug Administration (USFDA) has banned Ranbaxy’s Punjab-basedToansa Active Pharmaceutical Ingredients (API) plant. (stock plunges 20%)– From Money control

The important observation is that this kind of news comes in the media only after the move has completed. Is this down move predictable? The answer is yes and this is possible when one applies advanced Elliott wave theory with basic technical analysis in trading system.

Below is the part of Research report published in the morning of 15^th January, 2014,taken from“The Financial Waves STU” suggesting our bearish stand on Ranbaxy from short to medium term perspective.

Ranbaxy Daily chart: (Anticipated on 15^th January, 2014)

Ranbaxy Daily chart: (Happened)

Waves Analysis:

Anticipated on 15^th January 2014: As shown in weekly chart, from the start of 2011, prices have been moving in complex correction pattern (W-X-Y-X-Z). From August 2013, it moved higher in intermediate wave X and recent break below the channel suggest that it has started last leg on downside in form of wave Z. Currently we can expect, prices to move towards support of the downward moving channel, over medium term.

As shown in daily chart, momentum indicator RSI was unable to move above the strong resistance of 70 during the upside rally of August to mid January 2013, which suggest prices moved higher with lesser momentum and recent break of channel suggest downside correction has started. Now, on upside 450 will act as a strong resistance and can move towards 400/390 where support is placed.

Happened: Ranbaxy moved in lines with our expectations. Prices sustained below the crucial level of 450 and below the upward sloping channel and today we are witnessing fall of 20%. This is the power of technical analysis which provided us the bearish signal before the news arrived and help our client to capture the whole fall.

Do not wait for outcome or news and trade objectively. To know the next move in Ranbaxy subscribe to our Equity report –The Financial Waves Short term update which also cover comprehensive research on Nifty and 3 stocks. For subscription option visit to us at http://wavesstrategy.com/index.php/store.html