Trade of the Day: Traders Can Ride TEVA Stock Higher

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Teva Pharmaceutical Industries Ltd (ADR) (TEVA) — This generic and branded pharmaceutical maker, which is based in Israel, is one of the largest generic drug companies in the world. Management said its acquisition of Allergan PLC’s (AGN) global generics business, which they announced in July, will become accretive by double digits in 2016 and by 20% in 2017.

In late July, Capital IQ raised its opinion on TEVA stock to “buy” from “hold” and also upped its price target by $10 to $84, which is based on 16.5 times forward 12-month EPS of $5.11.

Its analysts note the earnings estimate does not include the acquisition of Allergan generics unit, which Teva’s management is confident will contribute to earnings. Capital IQ also mentioned that Teva’s growth was below its peers prior to the acquisition but should pick up now.

The drug maker reported better-than-expected Q2 EPS of $1.43, up 15% from a year ago. Management also raised it earnings guidance for the full year.

TEVA stock broke from an extended consolidation in January 2014 at about $40. For 18 months, shares have traded in a clearly defined, but slowly appreciating, bull channel. They consistently traded around the uptrending 50-day moving average. Support appeared at the stock’s 200-day moving average, where it flashed a triple buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), in June.

In July, TEVA stock broke from a short-term consolidation at $62 and jumped 10 points. Recent pressure from a weak stock market appears to be driving it down through an open gap at $66.61 to $62.65 toward its breakout point at $62.

Stocks often retrace breakouts. Try to buy TEVA stock under $62 for a run to its former high at about $72 by year end. If successful, this trade would provide a return of more than 16%, plus dividends.

TEVA Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/teva-pharmaceutical-industries-ltd-adr-stock-trade-of-the-day/.

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