Short-term traders can look to buy the stock for a possible target above 4000-4300 levels in the 2 months, suggest experts.
Divi’s Laboratories Ltd stock rose more than 5% in a week and over 4% in a month. The momentum helped the stock to break out from an inverse Head & Shoulder pattern and at the same time, it is making a rounding bottom formation on weekly charts.
The neckline of the inverse Head and Shoulder pattern was placed above 3800 levels. The stock closed at 3901 for the week ended 29th December 2023.
“Divi’s Laboratories stock has given a breakout of inverse head and shoulders pattern on daily charts which formed over almost 4 months. The breakout of the pattern was observed with rising volumes which favours bulls,” Aditya Thukral, Founder and analyst for AT Research & Risk Managers, said.
“At the same time, the stock is exhibiting a rounding bottom formation on weekly charts which is a bullish signal. The ticker is in an uptrend with the formations of higher highs and higher lows on the short-term as well as long-term charts,” he said.
In terms of price action, the stock is trading well above most of the crucial short- and long-term moving averages such as 5,10,30,50,100 and 200-DMA on the daily charts which is a positive sign for the bulls.
The positioning of RSI on weekly charts is still around 60 and provides room for longs to enjoy further upside in the stock.
The daily Relative Strength Index (RSI) is at 66.8. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed. The daily MACD is above its center and signal Line, this is a bullish indicator.
“Data points suggest that an uptrend continuation is expected in the stock prices where longs should have stop losses below 3565 on a weekly closing basis which is the higher low of the current rally,” highlights Thukral.
“The stock is comfortably placed above all the major exponential moving averages viz. 50-day, 100-day, and 200-day. The inverse head and shoulders pattern formed on charts suggests a target of 4380 levels on the stock which can take up to two months to achieve,” he recommended.
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(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
