Friday, March 17, 2017

VRX Valeant Pharma Weekly Chart; Oversold; Falling Wedge; Positive Divergence

Activist investor Bill Ackman at Pershing Square finally threw in the towel with Valeant exiting the VRX stock after riding it down from 270 to 10 a -96% crash in 18 months. Ackman lost his shirt but he had other trades that performed well. Anyone that has traded a long time will tell you that the moment you capitulate is comically when the bottom occurs. Ackman has officially given up on VRX but humorously, the monthly and weekly charts are set up with falling wedges, oversold conditions and universal positive divergence for all indicators (all bullish indications).

Price tags the lower standard deviation band so the middle band at 15.14, or higher, is on tap going forward. Price is extended below the moving averages and desperately needs a mean reversion higher. VRX should pop over the next week or three and then continue choppy sideways performing a basing pattern going forward.

As Ackman runs for his life with his shirt in tatters and his pants torn, hedge fund ValueAct Capital steps up to the plate buying VRX shares now owning more than 5% of the troubled pharma company. ValueAct has been involved with Valeant for 11 years rotating in and out of the shares many times. Judging by the chart, it appears that ValueAct is putting on a smart trade taking a chance on the recovery that is forecasted by the chart above.

If Valeant recovers sharply, Ackman's television set will have to be turned off and all sharp objects will need to be removed from sight. VRX will likely recover to the 15-20 area in the weeks and months ahead. Keystone is not in VRX but may nibble on some shares on the long side after looking for an entry point in the coming days or week or so. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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