In the fast paced 'Lightning Round' on Wednesday night's Mad Money program on CNBC, our own Jim Cramer was bearish on Teva Pharmaceuticals Industries (TEVA) . Prices broke below the March/April lows for a new 2018 low. That does not sound good and it does not look good either.
In this daily bar chart of TEVA, below, we can see that prices have been "rolling over" for months. From June to early November TEVA made a topping pattern. Volume increased in August and September but price gains could not be sustained and quickly reversed - not a sign of strength.
The slope of the 50-day simple moving average line turned negative in late August and has weakened so much it just closed below the cresting 200-day moving average line for what is commonly called a bearish death cross. This mathematical sell signal typically comes late but can be effective in trending markets.
The daily On-Balance-Volume (OBV) has been weakening from early November and tells me that sellers of TEVA have been more aggressive but the OBV diverged from the price action in August when prices briefly made a new high.
In the lower panel of this chart is the 12-day price momentum study and it shows that the sell-off has not slowed. No bullish divergence here.
In this weekly bar chart of TEVA, below, we can see a long decline. Volume was heavy into the late 2017 lows and TEVA did mount a recovery but that is old news now. Prices are pointed down. They are below the declining 40-week moving average line.
The weekly OBV line shows a downward sloping pattern and the weekly Moving Average Convergence Divergence (MACD) oscillator has crossed below the zero line for a weekly outright sell signal.
In this Point and Figure chart of TEVA, below, the computer program is projecting a potential downside price target of around $9 - signal digit. Ouch.
Bottom line strategy: TEVA is probably oversold but that may only produce a small, temporary bounce. I see no technical reason to approach TEVA from the long side.