Don't Underestimate Vertex Pharmaceuticals

Here's how the stock might surprise Wall Street.

During the Lightning Round segment of Mad Money Thursday night one caller asked Jim Cramer about Vertex Pharmaceuticals Inc. (VRTX) : "Wall Street underestimates this stock," said Cramer. Let's check and see how VRTX might surprise the sell side.

In the daily bar chart of VRTX, below, we can see that the stock price turned up strongly from early October when the broad market started its fourth-quarter rally. Prices pulled back toward the rising 50-day moving average line in early January in what looks like a buying opportunity. Prices are above the rising 200-day moving average line and maybe even extended above it.

The trading volume has been stronger since the middle of October telling us that more traders and investors have been attracted to the stock. The daily On-Balance-Volume (OBV) line started its rise in early October and tells us that buyers of VRTX have been more aggressive.

The Moving Average Convergence Divergence (MACD) oscillator gave a go long signal in late October when it crossed above the zero line. Another buy signal could be seen in early February if this stock keeps rising. 

 

 

In the weekly bar chart of VRTX, below, we can see that the prices were in an uptrend back in 2017 and then went into a lengthy consolidation pattern before resuming the uptrend this past October. VRTX is above the rising 40-week moving average line.

 

After a long sideways trend the weekly OBV line has broken out to new highs to confirm the new price highs. The MACD oscillator on this longer time frame is very bullish.  

 

 

In this first Point and Figure chart of VRTX, below, we used daily price data, which is projecting a potential upside price target in the $248 area. Not all that far above current levels.  

 

In this second Point and Figure chart of VRTX, below, we used weekly close-only prices. Here, the chart measures to a $271 price target. 

 

 

 

 

Bottom-line strategy: With a price target in the $270s and a risk point just below nearby support and the 50-day moving average line around $224, traders could go long VRTX.

 

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