1) Ranbaxy has been in the news for several wrong reasons in the last few days. US Drug Authority ban, Daichi (its promoter) blame on previous promoters for company's mis-management has done no good for the company. Also, recent speculation that US Drug Authority (USFDA) may inspect some other plants of Ranbaxy put further question marks on company's future growth prospects.
2) Derivatives data for yesterday indicate huge build up on Short side. Around 4 Lacs new shares have been added on the futures side. Also, tremendous Put accumulation at strike prices of 300, 290 indicate the kind of levels traders have been anticipating in this counter.
3) Though technically on charts, a long term support has seen between 320-340 Rs range on 10-year chart. Also the stock has corrected steeply twice in the last few months. Further correction would require much larger force from the bears than the previous two correction. (View Chart)
Support Levels
Resistance Levels
4) Also, the shorts accumulated in derivatives segment, may go for cover up before expiry which may take the stock upward.
5) On the upside though, a resistance exists around 375-380 levels. The stock consolidated around these levels in the last 3-4 days before correcting again. These levels are the perfect resistance levels for the counter.
6) Hence, considering all bad news already open in the market, the further downside may be limited, though, upside too is not much to be excited upon, given the fundamental reasons which prompt exit at every rise in the stock.
7) Hence, we recommend buying the stock in the range of 335-340 Rs with stop-loss of 315 and target levels of 360 and 375. Similarly if it goes up from here, then one may sell it in the range of 360-365 Rs with stop loss of 385 and target levels of 340 and 330.
8) F&O traders can go sell both 300 Put and 380 Calls for June expiry and exit if it goes in-the-money.
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