Generic drug maker Mylan (MYL) had a steep decline the past two months but now it looks like prices are trying to hold. It is still early in the game but it looks like buyers are slowly being attracted to the long side of MYL.
In this daily bar chart of MYL, below, we see a mixed picture with prices in a short-term downtrend but the possibility that a base has been developing since September. Let's dive down a little to see what the price action may be anticipating.
In this daily chart of MYL, above, we can see prices are below the declining 50-day moving average line and the 200-day moving average line. These lagging indicators are bearish at this point in time, but look at the higher lows from early November to early December to late January and now. Unfortunately, higher lows are not an uptrend in that we also need to see higher highs. The On-Balance-Volume (OBV) line has moved lower since early March but it has not broken to a new low below the November low. The 12-day momentum study has made a higher lower in April and while this is not a lengthy divergence it still suggests the pace of the price decline in April has slowed. A slower pace to the decline can foreshadow a possible rally in May.
In this weekly chart of MYL, above, we can see prices are below the declining 40-week moving average line. While the trend is down, prices would need to close below $35 to refresh the downtrend. With the weekly OBV line well above its October low, I would suggest the selling in the past two months has been less intense than on previous declines in the past 12 months. This subtle difference may be just enough for aggressive traders to probe the long side of MYL. The weekly Moving Average Convergence Divergence (MACD) oscillator just crossed the zero line with an outright sell signal. Because the two moving averages are not far below the zero line, we could get a reversal to the upside before too long if prices can improve.
In this Point and Figure chart of MYL, above, we can see it may need a rally to $46 to reinvigorate the long side. We can also see that the $36-$34 area is support.
Bottom line: If you can afford to risk below $34, I would probe the long side of MYL here. If short, I would cover. Add on strength above $41.