MARKSANS PHARMA , DAILY
After the last week’s news of Marksans Pharma failing to pass the UK drug regulator’s inspection with respect to its Good Manufacturing Practices (GMP), its shares have plunged nearly 34%.
On studying the chart of Marksans Pharma, the following can be observed :
- Clear indications of accumulation and distribution zones.
- A Double Top formation and subsequent breakout.
- RSI negative divergence.
Let’s look at the above in more details.
Accumulation Distribution zones :
From the period of January 2015 – July 2015, Marksans Pharma traded in a ‘Box/ Rectangle/Range’ of 50-75, this phase was the Accumulation phase, wherein institutional buying was driving the prices up to the resistance of 75.
Post the breakout beyond the level of 75, the prices shot up to 110-115, where began the distribution phase from mid-July up to the end of 2015.
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The Double Top formation:
At the high price zone of 110-115, Marksman Pharma tried to break above the 115 level twice but did not succeed.
This repeated attempt formed the Double top pattern which was confirmed when price broke below the level of 95 which was the low of the trough in between the two peaks.
In the double top formation breakout, the minimum target is the difference between the peaks and the trough, projected lower from the breakout level.
Here the minimum target points would be 115-95= 20 points and the target level would be 95-20=75.
The interesting thing here is that this projected target level of 75 is the same as the resistance level for the accumulation marked in the charts.
In the above chart, we can see that the target level of 75 has not only been achieved but also breached.
Since the negative momentum is very strong, the next level to look out for on the downside is the accumulation support level of 50.
RSI (Momentum Indicator) Negative Divergence:
A negative divergence is a phenomenon wherein the prices make higher high or like in our chart, an equal high, but the indicator fails to make the same and instead makes lower high.
This behavior is an indication of decreasing buying interest and tells the observer that the top is nearby.
On the chart of Marksans Pharma, when the Double Top was in formation the RSI had given an early indication of the upcoming weakness, warning anyone who was analyzing it at that time that the dark days were coming.
Another more recent point to take note of in the chart is the level at which RSI is currently.
It has passed below the level of 30, and this is an indication of Range Shift.
In bull trend, RSI trends in the zone of above 70, touching lows at 30, whereas in a bear trend, RSI stays shy of the 60 level on the upside and does not respect the level of 30 breaching it very easily.