Every recent buyer in Clovis Oncology (CLVS) in 2015 is feeling some pain this morning -- assuming they still hold the shares.
When I look back to the chart on Friday, I'll note a few things. First, the stock traded within a tightening rising wedge. Second, the longer-term moving average convergence divergence (MACD) had crossed into bearish territory late last week, along with the short-term Commodity Channel Index (CCI) doing the same, falling under 0.
It was all signs bearish, right? The charts foresaw this one!
Well, not so fast. The MACD had been running back and forth between bearish and bullish, as the stock traded within the wedge. The action of the MACD was consolidation, rather than bull or bear. The Relative Strength Index (RSI), while lower, still held the 50 mark on Friday -- again, neutral, but not bearish.
The same can be said for the Force Index, as it still held above zero. Furthermore, even though the stock traded under the 10-day simple moving average (SMA), it still held above the 50-day SMA, which was a bearish trigger in the past.
In the end, this is a case where technical analysis offered absolutely no insight as to the announcement this morning. While I'll argue for the merits of technical analysis, I feel it is also important to point out the times it fails, and this is a great example. Fundamentals trumped technical analysis in a big way. I would not have anticipated this drop based on Friday's chart.
As far as the floor goes, this is also a tougher call. Let's face it; the daily chart is absolutely useless now. We have to go back to trading ranges in 2013, and I'm not sure anyone who bought this stock in 2013 still holds it. We'll find resistance in the $35-$37 range with support around $26, so until something else develops, likely fundamentally, I would assume that would be our new trading range.
Anything under $25 would probably mean another negative development in regards to data. I could see the stock rallying on a technical basis if we close over $38 on a weekly print. If that occurs, then I would target $45-$50 on the upside, with the expectations we are capped there until the company receives some positive news, then it would rally further.
