While one can find many stocks in the current bullish environment that are gearing up for a big rally, one counter that has come on my radar is SeQuent Scientific Ltd (NS:). Firstly, the entire pharma space is on a roll for the last few months. The index has rallied over 34% since mid-March 2023 which is quite commendable.
Not just that, the index also managed to scale to a new lifetime high in today’s session, partly thanks to a better-than-expected ongoing earnings season for pharma companies. Now, SeQuent Scientific is one counter from this space, with a market capitalization of INR 2,274 crore that is yet to participate in the sector-wide rally.
Image Description: Weekly chart of SeQuent Scientific
Image Source: Investing.com
The stock is trading at quite low levels as it failed to grab investors’ attention. However, now the tide seems to be changing in favor of bulls. Today, the stock rallied 7.01% to INR 99.25 and crossed the resistance of INR 96 on the weekly time frame. Although this is just the beginning of the week therefore weekly charts are probably not ideal to look at, the chart structure clearly looks like easy money for investors.
This counter came crashing down from an all-time high of INR 336.5 in June 2021 all the way to a low of INR 61.8, marked in March this year. This massive value erosion of over 81% is probably the reason for the stock to potentially move higher at a strong pace. The premise here is mean reversion.
The counter is also forming a clear rounding-bottom chart pattern which is a strong reversal indicator and often reflects long-term trend changes. It has become extremely oversold therefore, the probability of a sharp rally backed by an all-time high sectoral index and the rounding bottom reversal pattern is high. This is not a short-term trading analysis but a long-term buy & hold kinda trade.
If given a few months of time, this counter can very easily rally to INR 150 which does not seem a big deal to me. A stop loss below the 52-week low, INR 61.8 seems okish. The exit levels are deep but so does the profit potential, therefore position sizing should be done appropriately in case traders are exploring this opportunity.
