I am a Drug (Ranbaxy) Addict - Sainik

The last couple of days have seen a phenomenon in a particular scrip which should have delighted any self-respecting technical analyst. The phenomenon is called Capitulation, i. e. a stock or index falling and breaking important supports on very high volumes.

The price and volume action in Ranbaxy in the last couple of days would classify as a textbook definition of what capitulation is all about. Typically, the trading volumes in the cash market for this scrip, is around 15-30 lakh, with deliveries being around half of the traded volumes.

On Monday, Ranbaxy clocked volumes of a little over 1 crore shares, with nearly 46 lakh shares, being marked for delivery. Yesterday it surpassed the record, when more than 2.45 crore shares were traded, and of this more than one crore shares were marked for delivery.

While the fall in the last two days can be attributed to fundamentals-and-news-driven factors, however, any self-respecting technical analyst should be concerned only with the price and volume action.

In my humble opinion, Ranbaxy is a good technical buy, with a target of above Rs 500 in the forseeable future. The stoploss would be yesterday's close of Rs 410.

This Claimer: I am long in Ranbaxy yesterday around Rs 415 and have added to my positions at Rs 435 today.