We recommend a sell in Dr Reddys Laboratories from a short-term perspective. The stock has been on a medium-term uptrend since its February 2008 low of Rs 501. However, the stock met with a significant resistance at Rs 720 level in early June and gradually began to move sideways.

The medium-term uptrend of the stock began to lose its momentum. Subsequently, the stock reversed direction and started to decline, backed by the negative divergence in the weekly momentum indicator.

The daily and weekly momentum indicators have entered the neutral region from the bullish zone. The stock breached the 21-day moving average by declining on June 19, indicating bearishness.

We also notice that the daily MACD (moving average convergence and divergence) is displaying negative divergence, supporting our bearish stance. We are negative on the stock in the short-term.

We expect the stock to decline until it hits our price target of Rs 610 in the forthcoming trading sessions. Traders with short-term perspective can sell the stock, while maintaining stop-loss at Rs 712.

© Copyright 2000 - 2009 The Hindu Business Line