Teva Pharmaceutical Industries Limited (TEVA) shares fell nearly 45% over the past three months despite a brief relief rally earlier this month. The big question for traders is whether the rally was a dead cat bounce or if a base has formed at around $16.00 to $17.00. The stock has been difficult for long-term investors to value given the many changes, which has opened the door for traders to control short-term price action in the interim.
Earlier this month, the company signed two agreements to sell its specialty global women’s health business for $1.38 billion. The proceeds from these sales will help pay down debt and alleviate a major concern for investors, but the company still faces an uphill battle in turning around its generics business, which has seen intensifying competition. The positive news for the stock is that the company has finally identified a new CEO with experience in leading turnarounds. (See also: Teva Stock Jumps After New CEO Is Named.)
From a technical perspective, the stock briefly rallied earlier this month before losing momentum by the middle of the month. The relative strength index (RSI) appears neutral with a 41.18 reading, while the moving average convergence divergence (MACD) experienced a bullish crossover in late August. These technical indicators provide few hints as to where the stock may be headed over the coming weeks.
Traders should watch for a continued breakdown to prior lows to close the gap formed earlier this month on the downside. If shares rally from this point, traders should watch for a move higher to retest prior highs at around $20.00 or even the 50-day moving average at around $22.30 on the upside. The RSI reading implies that there is room for the stock to move higher or lower, but the MACD points to a potential rally higher. (For more, see: Can Teva Pharmaceutical Turn Around Under New CEO?)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.