Most of this demand comes from institutional players. Thus, when an investor selects stocks, daily or weekly volume has to be checked as trading volumes is the measure of demand. Volume is the actual number of shares traded and any excessive change in the volume, which indicates large buying or selling, gives us a hint that there has been some major institutional activity, which has taken place. Thus, an investor can keep track of where the "big money" is flowing. Funds are just elephants jumping into a bathtub. They are simply so big that the water rises and splashes all over the place. Investors can track the average daily change of the stock over the past 50 trading days while traders can track the average change over the last 20 days.

Volume must pick up sharply on the breakout, or else, it could be a false or a feeble breakout. Many a times there is a pullback towards the breakout level with reduced volume and these pullbacks are excellent, ideal and safer buying opportunities because the vigor of the breakout, and especially the volume confirmation, can be verified. But in some cases, the stronger stock will exhibit a brief pullback and thus the investor must be quite sharp enough to get track the same. Place the stop just below the pullback support. Shrewd traders and investors avoid playing a stock for a "couple of points." Look for stock with atleast a 3 to 1 risk to reward ratio.

Preferable risk to reward ratio would be 5 to 1. The upside potential reward can be considered by viewing the next strong overhead resistance while your risk is where you nwould place a stop loss order. Since the July intermediate decline I have been seeing a sea change in the sectors, which are bottoming out. Initially, it looked as if the FMCG were poised to lead, but it now seems that the new economy stocks followed by the Indian pharma sector are likely to lead the next bull run and investors must again look out for sectors which look bullish. In the past two days, there has been a spurt in the activity in the pharma sector with an increase in volume and hence I have taken up this sector today. I will pick up only a few stocks in this sector which are looking bullish. All the other stocks are in a major downtrend and are lagging. Investors must pick up stocks from the leaders only.

Dr Reddy's Laboratories
Dr Reddy's has been spurting in the past two trading sessions with a rise in volume. The daily momentum indicators for the stock has already signaled a buy indicating that the intermediate trend of the stock is up. The current intermediate uptrend will have to take the stock above 1475 to confirm that the major trend is up. The weekly momentum indicator, which has been below its trigger line since quite some, has now started to move very close to its trigger line and will soon cross it. The relative strength line in the weekly charts have also moved closer to its trigger line and in the daily charts, they have already crossed the same indicating that the stock will soon outperform the Sensex if it continues to rise in the same manner.

Investors can either pick up long positions in the stock in the current intermediate uptrend or wait for the next intermediate downtrend, after they confirm that the major trend is up, and than pick up long positions in the stock. The stock has moved closer to its 30 WMA and will move past this long term moving average once the stock goes into a major uptrend. The stock has already moved past its strong descending trendline.

Cipla
Cipla is in an intermediate uptrend, but is still below its earlier intermediate bottom. However, as the stock has exhibited ascending intermediate bottoms, there is a good possibility that the major trend of the stock may have turned up. This will be confirmed once the stock closes above its earlier intermediate top of 970 in the current intermediate uptrend. Thus currently long trading positions in the stock must be held on and if the major uptrend of the stock is confirmed, the long trading positions in the stock must be switched to investments. The stock has moved closer to its 30 WMA but is still below it. Once the major uptrend is confirmed, the stock will move past the long term moving average.

Morepan Labs
Morepan Labs has been zooming ahead with a spurt in volume in the current intermediate uptrend. A close above 654.90 will confirm a major uptrend for the stock. The recent volume action by the stock has been quite bullish and suggest that the stock is poised to cross the earlier intermediate top. This will result in the completion of the double bottom formation by the stock and will give the stock a minimum target of 200 points on the higher side from the neckline. The relative strength line has also moved very close to its trigger line and has been rising and long positions in the stock must be held on. More long positions in the stock can be picked up in the current intermediate uptrend in a minor decline and investors must initially use the minor bottom as the first stop loss level.

Nicholas Piramal
Nicholas Piramal has seen a spurt in the activity in the past week and this can be seen by the large activity in the chart. Though the stock may have bottomed out here, the major uptrend for the stock has yet to be confirmed as the stock is still below its earlier intermediate top and its 30 WMA.

Thus investors must not be in a hurry and jump into the stock. A higher intermediate bottom in the next intermediate downtrend will be a better sign for investors to get into the stock. By that time it will be clear weather the sector is bottoming out or not. The relative strength line for the stock is below its trigger line suggesting that the stock is underperforming theindices.

Ranbaxy
Ranbaxy, in the current intermediate uptrend, has moved past its 30 WMA and has exhibited ascending intermediate bottoms, suggesting that the major trend of the stock could be up. This will be confirmed once the stock closes above 688.80 in the current intermediate rise. There has been a spurt in the volume in the last week, but higher volumes must be seen in the coming week if the stock has to confirm a major uptrend. Any long positions picked up must be held on in their trading folio at the moment and if the stock confirms a major uptrend, these long positions must be shifted to investments. The relative strength line has turned bullish and has moved closer to its trigger line. A confirmation of a major uptrend will also result in the relative strength line moving above the trigger line. One bullish thing about the stock is that the stock is already above its 30 WMA and once the major uptrend s confirmed, higher momentum in the stock will be seen.

Sun Pharma
Sun Pharma has been trading just above its long-term moving average in a narrow range an will have to close above 640 to confirm a major uptrend.

However, as the stock is moving in the narrow range investors must stay away from the stock and must not get trapped in the current sideways move. Get into the stock once the stock breakout of this sideways move. The relative strength line for the stock is already above its trigger line but is currently moving sideways, hence it has been termed as sideways. If the stock falls below 540 after completing this sideways move, the major trend of the stock will be pronounced as down. Thus investors must get into the stock only after the stock breaks out of the current sideways move.