Trading recommendations - July 31, 2005

GSK Pharma - this scrip has been recommended earlier vide our edition dtd. Jan 16 & 30, June 26, July 02, 09 and 16, 2005 the stock has rewarded bulls handsomely, though we feel the best is yet to come. Click here to view the previous recommendations. Technical traders may note how the scrip makes consistent higher tops and bottoms and oscillators are confirming the bullish trend. The high relative strength ( to understand the importance of relative strength, click here to learn the tutorial ) of 189 is confidence inspiring and rising moving averages complete the optimistic picture. We feel the higher volatility and nervousness in aggressive scrips will see an upward re-rating of relatively defensive pharma scrips and this stock is a likely beneficiary. We recommend a buy on declines only.

Your call of action -

• Investors / cash segment players - buy on declines to the 860 levels and keep room for pyramid style averaging till the 800 mark. A stop loss at the 780 ( unlikely ) level is advocated and profit taking beyond the 960 levels is advocated in the medium term. Over a long term time frame, we project a four digit level for the scrip.

• Aggressive F&O traders - Buy the August futures ( quoting at Rs 6 premium to cash ) on declines to the 865 and leave room for averaging till the 835 mark. A stop loss is advised at the 820 and  a profit target well past the 900 levels in the medium term.

• Derivatives contract size - Market lot = 300 shares. F&O margin = approx Rs 42,000 (subject to change daily )

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