Does Ranbaxy offer low risk setup?

I covered Ranbaxy stock on May 24 when it tried breaking past 525 but stock failed. Here’s again revisiting the stock as it looks interesting near support.

Ranbaxy Stock

Here’s how Ranbaxy stock positioned on chart…

Source: Chartalert.com

As you can see in the chart above: Ranbaxy stock has been struggling to move past 525 since last one year. It once did try to move past 525 around May 25 but there was no follow through and stock failed. Having said that remember breakout failure does not mean end of uptrend. It only means stock is not ready to make a big move in near term.

Now here are some things about Ranbaxy stock chart:

1. There is well defined resistance at 525.  Since August of last year – stock has failed many times to cross over it
2. This CY2012 – Ranbaxy first rallied to 100 dma and stalled. The stock pulled back to 400 and then again in April – stock rallied with full force and took out 100 dma with momentum
3. The momentum post breakout above 100 dma was extremely strong and it was linear upmove to 525
4. But since the encounter of resistance – the stock has pulled back to 100 dma and traded sideways.

What does this mean?

The momentum that brought the stock above 100 dma still seems intact at least to hold the stock above support. The problem: Though stock is able to hold support, there is no energy/catalyst in the stock to drive a big move. It means: If one has patience and it believes the stock will do well in future – one can accumulate the stock near support. [low risk setup]

Fundamentally speaking – Ranbaxy Labs reported better than expected results last quarter due to higher margin, forex gain on derivatives and lower tax provision. Hope the good earnings trend may continue this quarter. The stock needs catalyst to make any big move on the upside.

What one needs to watch right now: whether 100 dma on the stock will hold or not?