During turbulent times like these, we need to look for companies that are improving themselves, rather than just relying on the market, our own Jim Cramer said during Tuesday's Mad Money program. One name doing just that? Bausch Health Companies Inc. (BHC) .
Known as Valeant Pharmaceuticals in a previous life, Bausch Health had a bad business plan, monstrous debt and a bad reputation after it fell from the $250s to the single digits, Cramer explained.
White knights exist and in came Joe Papa as its CEO. While the turnaround took some time, Papa is making big strides. He's paying down debt, repairing the company's reputation and investing in R&D said Cramer. That last one's important for any pharmaceutical company to have a real future.
The shares have tripled from the nadir but we need to be forward-looking from here. Let's check out the charts and indicators.
In the daily bar chart of BHC, below, we can see that prices have indeed rallied the past 12 months. If you were lucky enough you may have bought BHC at $14 and rode it up to $28. I have never been that lucky.
Since June it looks like the trend has shifted to a sideways pattern bounded by $21 on the lower end and the $28-$29 area on the top end. Prices are holding above the rising 50-day moving average line as well as the bullish 200-day line.
What is not so bullish is the movement of the On-Balance-Volume (OBV) line. If you look at the volume pattern from December to early May you can see some good activity. Volume dries up from early May and the OBV line goes flat/neutral. A flat OBV line tells me that investors have no strong opinions on BHC.
In the lower panel is the Moving Average Convergence Divergence (MACD), which shows a weakening pattern from June with lower highs.
In the weekly bar chart of BHC, below, we needed to show the price action on a log scale because of the big price change over the past three years. Prices are above the rising 40-week moving average line.
The weekly OBV line is neutral and so is the MACD oscillator. A weekly close or two weekly closes above $30 would probably be bullish but we do not have that at this juncture.
In this Point and Figure chart, below, we can see a possible or potential long-term price target of $50.50 but we will need a trade at $29 for a double top breakout. A decline to $20 would be bearish.
Bottom-line strategy: It is great that BHC has come back from a near death experience. Prices could continue higher but I want to see some strong proof of the strength of this stock. Show me a strong weekly close above $30 with strong volume and I would recommend going long for a move to $50 if you believe the Point and Figure target. Otherwise, I am neutral on BHC here.