Perrigo (PRGO) is trading sharply lower this morning and could make a new 52-week low. How should we navigate these potentially uncharted waters?
Let's check things out, beginning with PRGO's daily chart:
We can see above that the stock's price has been in a downtrend for the past 12 months. Prices are below both the 50- and 200-day simple moving averages (denoted with gold and blue lines above), and both of those are also in downtrends.
PRGO also gapped lower this morning, breaking its May low. Among technicals, the On-Balance-Volume line (OBV) has been weak the past three to four months while prices tried to base. This suggests that sellers are more aggressive, and that investors are still liquidating longs. A May/June bullish divergence with the momentum indicator did little to boost prices.
Now let's look at the stock's weekly chart:
This chart gives us another look at the decline that PRGO has suffered. Prices are below the declining 40-week moving average line in the chart above, while the OBV line shows a big liquidation decline followed by only a flat recent response. The 12-week momentum study isn't diverging from the price action, so net/net further declines seem likely.
Using a point-and-figure chart (not shown here), we have a downside price target of $63 for PRGO vs. the stock's current price of around $85. The bottom line is: Don't try to catch the falling knife here.