Teva Pharmaceutical Has a Long Road Back

 | Sep 12, 2017 | 9:56 AM EDT
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It has not been a good year for Teva Pharmaceutical Industries (TEVA) when it comes to its ADR price. Over the past 12 months prices have been cut in half and then cut in half again -- trading above $50 last September and nearly reaching $15 this September. Prices for TEVA, which were in the lofty area of the lows $70s in 2015, have not been this low since 2002 (see the second chart below).

The damage on the charts is substantial and when that happens it typically takes a long period of repair or base building to make the charts look better. Let's take a look.

In this daily bar chart of TEVA, above, we can see a steady erosion from last September until the end of June. Prices recovered slightly from early June until the end of July when they turned lower again. At the beginning of August prices plunged to the downside on extremely heavy turnover. There was no oversold bounces even though TEVA was oversold. Only recently have prices rebounded.

TEVA is below the declining 50-day moving average line as well as the declining 200-day moving average line. The On-Balance-Volume (OBV) line moved lower the past 12 months but moved sharply lower in August as sellers of TEVA were very aggressive.

In the lower panel is the 12-day momentum study which shows a short-term bullish divergence with a higher momentum reading in early September compared to the reading in August.

We elected to use a weekly chart of TEVA going back to 2002 to show the price damage. In this weekly chart, above, we can see that prices broke many levels of support going back to 2004. This chart does not show much support around $15 and even if it did one has to wonder how traders would react to a level from 15-years ago.

Prices are below the declining 40-week moving average line and the weekly OBV line in the bottom panel has been in a decline since early 2010.

In this Point and Figure chart of TEVA, above, we can see the huge column of "O's" for the decline. Prices have recently jumped higher and there is a column of "X's" as well as an upside price target in the mid-$20s.

Bottom line: The price plunge and heavy trading volume in August could easily have been a selling climax. Prices can rebound in the short-run but a sustained advance is likely going to need a long period of base building or sideways price action.

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