For one of his Executive Decision segments of "Mad Money" Wednesday, Jiim Cramer spoke with Murray Kessler, president and CEO of Perrigo Co. PLC (PRGO) , a maker of private-label, over-the-counter pharmaceutical and wellness products. Perrigo pre-announced 11% organic growth Tuesday.
Kessler said demand is strong for Perrigo's products, especially for items such as its generic acetaminophen. Kessler noted that Perrigo sells 75% of its medicines in the U.S. and makes the majority of them here as well. As concerns over medication supplies grows, it's likely that more drugs will be made in the U.S.
Let's check out the charts of PRGO.
In this daily bar chart of PRGO, below, we see that in March prices dropped back down to the low of the year in the $42-$40. Early in the decline prices broke below the cresting 50-day moving average line and the still-rising 200-day line. Now the slope of the 50-day line is negative and poised to cross below the flat 200-day line.
The trade volume has been heavier than average since late February and the On-Balance-Volume (OBV) line shows a decline from the middle of January. The OBV line still is pointed down, telling us that sellers of PRGO have been more aggressive, but the line is close to a reversal, I believe. The 12-day price momentum study in the lower panel shows us a bullish divergence with higher lows in March when prices were making equal lows. This is a good sign for a rally ahead.
In this weekly bar chart of PRGO, below, we can see that prices have largely traded sideways since late 2018, with buying interest showing up below $42 and down to $35. Prices are below the declining 40-week moving average line, but it will only take a minor rally to cross back above it. The weekly OBV line looks like it has been bottoming in March. The weekly Moving Average Convergence Divergence (MACD) oscillator is not far below the zero line and narrowing toward a possible buy signal.
In this Point and Figure chart of PRGO, below, we used weekly close-only price data to construct the X's and O's. Here the chart is projecting a potential rally back to the $56 area.
Bottom line strategy: After dealing with a drug recall fiasco two years ago I cannot wait for drugs and supplements to be made in the U.S. again. I guess I have some skin in the game when I look at PRGO. Traders could approach the long side of PRGO at current levels, risking a close below $41. Our initial upside price target is $56.