Trading recommendations - Dec 19, 2004

Dr Reddy - This pharmaceuticals major was recommended by us in our earlier editions dtd Nov 07, Nov 14, Nov 21, Nov 28 and Dec 05. click here to view the previous files. Technical analysts will note how the scrip makes higher tops and bottoms formations and the oscillators are moving in tandem with the price chart. The scrip enjoys a high relative strength of 570 ( 100 = base ) though the same has been falling since the beginning of this year. What is noteworthy is the fact that the pharmaceutical segment is seen as a defensive play in turbulent equity markets and any correction in the markets will be seen as sign of strength for this segment. Note the rounding bottom formation on the price chart and the intra-week high of 849 which is higher than the 835 congestion band. We recommend a buy.

Your call of action - .

• Investors / cash segment players - Buy the scrip at the current levels and hold with a stop loss at the 810 levels. Expect to book profits at the 875 levels in the short / medium term in a conducive market. Longer term players can expect 900 + in the pre-budget move.

• Aggressive F&O traders - Buy the January futures ( quoting at Rs 5 premium to cash ) at the 840 levels and hold with a stop loss at the 810 levels. Expect to book profits at the 875 + levels in the coming weeks in a conducive market. We do not advocate any options strategy for this counter.

• Derivatives contract size - Market lot = 200 shares. F&O margin = approx Rs 29,000 (subject to change daily )

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