A few old economy sectors are still in a major uptrend, but are likely to correct in the next few weeks. Today, I will take a look at the pharma sector. A few Indian and MNC companies are likely to hold out in the bearish conditions if the decline continues and the Sensex drops below 3803 which now look quite likely.

Cipla
Cipla, along with many stocks in the pharma sector, is in a major uptrend, but the stock has been facing a strong selling pressure in its current intermediate downtrend. The stock has currently pulled back towards its 30 weekly moving average (WMA) and will have to stay above 887 in the current intermediate downtrend if the major trend has to remain up. The relative strength line for the stock is above its trigger line but has flattened out and has started moving closer to it indicating short-term weakness. If this short term weakness percolates into further weakness, and the stock is unable to stay above the 887 in the current intermediate downtrend, the major trend of the stock will turn down.

On the other hand, if the stock stays above this level in the current intermediate downtrend, than investors may pick up the stock in the next intermediate rise.

Dr Reddy's Laboratories
Dr Reddy has been oscillating about the 30 WMA since the past few months and the major trend of the stock is sideways. The intermediate trend is currently up and in the current intermediate uptrend, it will have to move past its earlier intermediate top of 1395 to confirm a change in the major trend. The relative strength line, which had recently fallen below its trigger line, has moved back towards it and will oscillate about it if the current sideways trend continues. If the stock drops below 1220, the major trend turns down and lower levels will be seen. As the major trend of the stock is sideways, investors must currently stay away from it. RanbaxyRanbaxy dropped below its earlier intermediate bottom in its last intermediate decline and its 30 WMA and hence, the major trend of the stock has been defined as down. The stock is currently in a major uptrend, but its earlier intermediate top is a little far away and will require some more time to confirm any change in the major trend. The volume action does not suggest that the stock is in a major uptrend and investors must currently stay away from it.Allow the stock to exhibit ascending intermediate bottom to get into it.

Wockhardt LT
Wockhardt LT is in a major uptrend as the stock has been exhibiting ascending intermediate tops and bottoms and has been staying above its rising 30 WMA. The recent rise in the stock has been accompanied by a spurt in volume indicating that it has been accumulating at these levels. Though the intermediate trend is down, the rate of decline exhibited by the stock is not quite strong which is a bullish sign and suggests that it will bottom out around the 30 WMA where investors can look out for switching from the other stocks into this.

The relative strength line for the stock is bullish as its has been staying above its trigger line and continues to rise.

E. Merck
E. Merck is the strongest of the MNC pharma stocks. The stock bottomed out in April 2000 and since then it has been exhibiting ascending intermediate tops and bottoms.

The short term daily momentum indicators have been exhibiting some weakness and this could result in some weakness in the short term, but as the major trend is up, investors must hold on to the stock. The next strong resistance to the stock is at 650 and this is the level where investors must keep an eye on. The relative strength line for the stock continues to move up and suggest that it is outperforming the indices.

Hold on to the long positions. After a decline, when the stock pulls back towards its 30 WMA, more long positions can be added.

German Remedies
German Remedies recently confirmed a major uptrend as the stock closed above its earlier intermediate top with a spurt in volume. The relative strength line has also crossed its trigger line recently indicating that the stock has now been outperforming the indices. The breakout above its earlier intermediate top with a spurt in volume is bullish, but if the market conditions turn bearish, the stock may fall back below its 30 WMA.

Thus, the only deterrent for the stock now is that the market conditions are likely to turn more bearish. However, if the defensive stocks continue to remain buoyant, investors can pick up long positions and traders can trade on the long side.

Glaxo
Like many MNC pharma stocks, Glaxo has also gone into a major uptrend in the last week, when the stock broke out of the sideways zone with a spurt in volumes. This suggests that it will exhibit higher level, but again as the prevailing circumstances of the market dictate the fate of many major trends and if the Sensex drops into a major downtrend, it is quite likely that a few of the stocks which have recently gone into a major uptrend may fall back.

However, if this does not happen, investors may add to their long positions while traders must trade this stock on the long side.