Dr. Reddys - Diverging Trends

Dr. Reddys chart is probably one of the better stocks to look at to understand why volumes are needed for a sustainable rally. The stock has fell by over 35% since May and the stock has rallied by more than 30% since that fall. However, the most interesting is not in this chart but in the Accumulation Distribution chart. The stock has not been able to replicate the return on the volume chart. It has largely been falling in this market in spite two big changes in the price movements. Largely investors are existing out of this stock.

• MACD has given a 'sell' on the charts.
  
• RSI is falling drastically and is not a good sign at the pace of the fall in the technical side

Yet another interesting fact is that the stock has just broken the 61.8% support line. It still remains to be seen if it would touch Rs. 712 where the stock has some support level at 50% Fibonacci series. However, the following needs to be looked at before entering into this transaction. The stock has not convincingly broken the support level. Unless the stock falls to Rs. 730, where there is a strong possibility that Rs. 720 could be touched just about immediately considering the volatility of the stock.

On the upside, unless there is volume, the rally just cant sustain. Hence, this is a stock with immense potential but a wonderfullandmine in the stock.