Pfizer (PFE) reported second-quarter results yesterday morning that beat expectations, but the pharma giant lowered revenue guidance for the full year, which led the stock to drop. Tuesday’s selling in the stock resulted in some technical damage, which active investors and traders could now use to lean against the stock on the short side.
After it was all said and done on Tuesday, PFE stock dropped 1.23% on increased volume.
On the weekly logarithmic chart stretching back to 2010, note that Tuesday’s move has brought the stock back down to the lower end of the multiyear uptrending channel for the second time in just a few weeks, and thus looks increasingly vulnerable to break this support line.
Furthermore, PFE stock’s weekly stochastic momentum oscillator topped in November 2013, but price continued to rise into its March 2014 top. In other words, momentum began to wane before price – this negative divergence is just another tick in favor of the bears in the near to medium term.
On the daily chart, note that PFE stock in mid-July found resistance near its 200-day simple moving average (red line), where it also gave us a bearish shooting star candle. Through a medium-term lens, since the May lows the stock has also traced out a visually obvious channel — a bear flag pattern that stands a good chance of resolving lower.
Tuesday’s selloff resulted in a bearish outside day on increased volume — PFE stock rallied at the start of the day, only to give back all of those gains before closing lower.
Active investors and traders can now consider using Tuesday’s highs to short PFE stock against for a move toward the $27.50 – $28 area.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.