GlaxoSmithKline (NYSE:GSK) — Earnings estimates for 2012 for the world’s second largest pharmaceutical company are $3.62 and $3.90 in 2013. But the company has a history of missing estimates, and failed to achieve consensus earnings in three of the past four quarters. Modest sales growth is expected over the next five years due to its new drug pipeline, which has limited markets.
The company pays an annual dividend of $2.32 for a 5.3% yield and went ex-dividend on Nov. 14. S&P has a “sell” rating on the stock with an objective of $40.
The stock has been rising for the past three weeks after breaking down from a channel trend in early October that dropped it from $45.50 to $41.68 in mid-November. During the fall, a death cross (long-term bearish signal) was triggered.
On Wednesday, the stock suffered a major reversal, flashing a sell signal from our internal indicator, the Collins-Bollinger Reversal (CBR), as it fell from its 50-day moving average on high volume.
Sell GSK at the market if you own it. Traders could consider shorting the stock with a trading objective of $40. As with all short sales, be sure to check with your broker for any unusual margin requirements or extra dividends, and use stop-loss orders to protect against potentially unlimited losses.