Teva Phamaceutical Industries (TEVA) has been in a serious tailspin to the downside since its zenith in 2015. Prices are now down to a key support level that held in 2011 through 2013 (see the long-term chart below). Can TEVA hold yet again at this key chart level or is it in for still further declines in the months ahead?
Let's look closer at the charts and indicators below. Hopefully the answer will be easier than opening those childproof caps.
In this one-year daily vertical bar chart of TEVA, above, we can the persistent slide over the past 12 months. Prices decline then hold for a few months or just weeks before renewed declines. Once the $48 level was broken in late September/early October it looks like the downtrend accelerated.
An interesting thing happens with volume and momentum in November. Notice the heavy pace of trading in November? If you remember that for every seller there is a buyer then this makes sense -- some investors or traders were dumping shares and others were using that selling to acquire a long position. How do we "see" that? When you see heavy volume and prices do not cascade lower it usually means that aggressive buying is meeting aggressive selling.
In addition look at the movement in the On-Balance-Volume (OBV) line, which turned up from an October low. Now look at the 12-day momentum study. Momentum reading increase from October to November and early December as prices move lower. This is a bullish divergence and may foreshadow a price reversal.
To get a sense of TEVA trends and understand why the $35 level is key support I used a weekly chart going back to 2002, above. Notice how the $35 level acted as support in 2008, 2011, 2012 and 2013? Will this support level hold this time? I am not so sure. Despite some positive clues from volume and momentum on the daily chart, TEVA has pushed down to the lower end of support, suggesting that all of the support can be broken.
The weekly OBV line is pointed down and the Moving Average Convergence Divergence (MAC) oscillator is deep in bearish territory.
Bottom line: It would be nice to catch a low in TEVA but the risk looks too high in my opinion. I am content to wait for a bounce and then a retest before stepping up to buy.