Today's Pick - Dr Reddy's Labs

We recommend a sell in Dr Reddys Laboratories from a short-term perspective. It is clearly evident from the charts of Dr Reddys Laboratories that it has been on an intermediate-term downtrend from its June high of Rs 739 (a significant resistance level). In late July, the stock conclusively crossed below its 200-day moving average and has failed to surpass this average since then. We note that the stock has formed a descending triangle pattern, since august. This triangle pattern is a bearish continuation pattern, signalling that the stock’s downtrend would continue after the break out. On September 11, the stock broke through the lower boundary of the descending triangle pattern at Rs 570. The daily and weekly relative strength indexes have entered into the bearish zone. Moreover, the moving average convergence and divergence is signalling a sell, which supports our viewpoint. The stock is trading well below its 21 and 50-day moving averages. Our short-term forecast for the stock is negative. We anticipate the stock to decline further until it hits our price target of Rs 505 in the short-term. Traders with short-term horizon can sell the stock while maintaining a stop-loss at Rs 590.