Short Ranbaxy Laboratories; target Rs 355: ICICIdirect.com

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Short Ranbaxy Laboratories; target Rs 355: ICICIdirect.com

ICICIdirect.com is bearish on Ranbaxy Laboratories and has recommended short rating on the stock with a target price of Rs 355 in its November 24, 2011 research report.

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ICICIdirect.com is bearish on Ranbaxy Laboratories and has recommended short rating on the stock with a target price of Rs 355 in its November 24, 2011 research report.

"Ranbaxy Laboratories over the past couple of years, the share price of the stock has tended to oscillate in the broad range of Rs 400 on the downside and Rs 600 on the higher side. The most important observation on the charts of Ranbaxy Laboratories is that the price movement since November 2009 till date appears to have taken form of a Head and Shoulder top pattern as highlighted in the above weekly price chart. It must be noted that a Head and Shoulder top formation is a bearish price pattern resulting in severe price damage on confirmation of a breakdown below the neckline. In case of Ranbaxy, the neckline for the said pattern is placed around Rs 420 (weekly closing basis)."

"The minimum measuring implication of this bearish price pattern i.e. the distance between the right shoulder peaks and the neckline projects downsides towards Rs 355 or lower levels over the next two or three months. The pattern would become void only if the price closes above Rs 470 on a weekly basis. Among oscillators, the MACD (E-12/26/9) is exhibiting negative divergence as it continues to make lower top and lower bottoms since 2009. This is in contrast to the share price, which was forming higher peaks and troughs during 2009-2010, clearly highlighting the underlying weakness in trend."

"Taking cues from the abovementioned technical evidence, we expect the price of Ranbaxy to head lower towards Rs 355. Therefore, pullbacks from current levels ranging between Rs 425 and 440 should be utilised to create short positions in the stock. A change in view would be warranted only if the stock posts a weekly closing above Rs 470 levels," says ICICIdirect.com research report.

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To read the full report click on the attachment