Chart Check: A breakout from 15-month triangular consolidation powering rally in Dr Reddy’s Lab

Dr Reddy’s Laboratories, part of the pharma space, hit a fresh 52-week high in April 2023 and technical indicators suggest that the upside may not be over yet.

Short-term traders can look to buy the stock now or on dips for a possible target of Rs 5,000 in the next 3 months, suggest experts.

The pharma stock hit a 52-week high of Rs 4,939 on 19 April 2023. The stock price gave a breakout above the triangular consolidation of the last 15 months on the weekly charts signaling the resumption of up move and offering fresh entry opportunities, suggest experts.

Dr Reddy’s (DRL) is a leading pharma player with a strong presence in pharmaceutical generics, APIs, custom services, biosimilar, and complex formulations.

The stock is up more than 3% in a week and over 11% in a month. The recent rally has already pushed the stock into the overbought zone and some pullback could be in the offing.

The Relative Strength Index (RSI) is at 81.1. RSI above 80 is considered strongly overbought. This implies that the stock may show a pullback. MACD is above its center and signal Line, this is a bullish indicator.


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.

The Nifty Pharma index, after 20 months of corrective decline, is witnessing buying demand from the long term 200 week’s EMA and is showing signs of the end of the corrective phase, thus offering a favorable risk-reward set up in most pharma stocks.

“Within the pharma space, we remain constructive on Dr Reddy’s as it recently generated a breakout above the triangular consolidation of the last 15 months, signaling resumption of up move and offering a fresh entry opportunity,” Pankaj Pandey, Head– Research at ICICI Securities Limited said in a report.

“The stock recently witnessed a faster retracement of the last falling segment as it retraced 18 weeks’ decline (Rs 4,645-4,297) in just five weeks. A faster retracement in less than half the time interval signals strength and a robust price structure,” he said.

“We expect the stock to extend its up move after the long-term breakout and head towards Rs 5,390 levels in the next 3 months as it is the 123.6% external retracement of the major breather (Rs 5,077-3,654),” recommends Pandey.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of Economic Times)