Feel like going dumpster diving? Check out this chart of Valeant (VRX). (February 15, 2017)
I want to look at Valeant Pharmaceuticals ( NYSE:VRX ). Bridget, my trading assistant and venerated contributor in our trading forums, started looking for a category of stocks that she calls ‘dumpster diving’ and the name kind of speaks for itself. One of the stocks she was looking at is Valeant Pharmaceuticals ( NYSE:VRX ). This is not a winner. This is not a stock that has been in a strong uptrend, doing really nicely, sideways consolidation. Bam! Oh, it is going to 900.00. This isn’t that. This is a stock that has been a Bill Ackman killer; this is what this really looks like. The red line is the 50-day moving average. You can see one, two, three lows right around at this same level and the stock has just kind of continued to trickle lower.
Well, I can really make a case for this being a ‘W’ bottom here, up then down, and up again. This is what I like to see. I like to see the stock coming out of a fairly tight squeeze here. It is breaking out above an important technical indicator here, that is the 50-day moving average. And unlike here, where it gapped up and then traded right back down, 25 percent loss, here, the stock is back up above it. And over the last two days has continued moving higher, closing up near the intraday highs on heavier than average volume.
This stock has some room to move. They don’t report earnings for another couple of weeks, on the 28th. I think, if this stock can clear 17.00, it is probably going to do it tomorrow, this can be a 15 ‘percenter’ from there, would be my guess. Maybe more but lets not get out ahead of ourselves. Hey, maybe it could be a double. But I am looking at a 15 percent gain here before they report earnings on the 28th, just on the strength of this rebound off the bottom.
So you may want to check that out and then just keep a reasonable stop, it really should go clear back under the 50-day moving average. You can look at the percentage though, that is like 13.5 percent, that is a pretty loose stop. The way you can do this is, you either take a very small position to start with. Or, I know, take a small position to start with and then keep a little bit tighter stop right here. And then you are only adding to that position and you will be adding quickly if the stock is moving higher.