April 18, 2024 (MLN): The pharmaceutical sector may extend its rally further amid strong technical indicators coupled with favorable market conditions.

While macro factors have helped fuel the rally, investors are also scouring charts to determine if the momentum can sustain.

Investors who put store in technical analysis see a crossover of 50-day moving average above the 200-day moving average a strong signal for change in trend direction.

The 50D MA of pharmaceutical sector index crossed above the 200D MA in November 2023 and has remained above it.

Moreover, the index consolidated near its 50D MA for the last month before surging upwards in the past few trading sessions.

It is worth noting that the sector had been in a strong downtrend since mid-2021.

However, in early 2023, the momentum dried down, and distribution was formed.

The sector index's price action last year was clean; it broke below the 2019 lows, followed by a clear shift in market structure as explained in the chart above.

Since then, the sector has witnessed a substantial rally, albeit lagging behind the broader market’s performance, compared to the KSE-100’s impressive performance surge the same timeframe.

Strong Scrips

AGP stands out as one of the strongest stocks. A break above Rs82 may send it above Rs100 rather quickly, given the multiple poor highs of 2022.

The stock price gained 11.1% in the current month-to-date, 15.6% in 2024, and 43.8% FYTD.

HALEON has broken its key resistance in the last session. However, entering upon a retest might be preferred, given its RSI level above 74, which is typically viewed as overheating.

A consolidation in the next few sessions to reset the overheated momentum will likely make room for the next leg up.

SEARL regained its 50-week exponential moving average a few months back for the first time since 2021.

Since then, it has largely traded sideways around this level. Regaining its momentum can trigger a significant bounce.

In the previous instance when SEARL regained its 50W EMA, in 2020, the share price surged about 50%. A gain of a similar magnitude would put the price around Rs90.

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.

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Posted on: 2024-04-18T08:40:00+05:00