There’s no sugarcoating it here. The chart of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is about as ugly as it gets. This week has VRX stock sitting at its lowest levels since 2009. It’s down 30% in just the last six trading sessions and more than 95% from its all-time highs above $250.

The relative strength index (RSI, at the bottom of the chart) is oversold at this point, but that doesn’t mean that VRX is ready to stop its decline. Remember, an RSI can hang in oversold or overbought territory for an extended period of time before the trend reverses direction.

There are no signs of a bottom forming or that the stock is preparing to bounce. While it’s true that it will not go straight down from here and that eventually investors will look to jump back in, buying VRX stock now is the epitome of catching a falling knife.

VRX Stock in the News

The headlines surrounding this company also have not been good for some time now, and it has only gotten worse over the past week.

• On Monday, management announced they will be restructuring some of their debt, which the market clearly didn’t like. Valeant stock pulled back as a result, and I suspect the massive amount of debt the company is sitting on (approximately $31 billion) will keep a lid on upside for a long time.
• On Tuesday, Deutsche Bank maintained its “Hold” rating on VRX stock but lowered its target to $19.

You also can’t forget about the accounting scandal that started the long-term sell-off in the first place.

When it comes to investing in a stock that has undergone a scandal, it’s important to analyze where that company is today and where it has the potential to be once the scandal is far in the past. Today, Valeant Pharmaceuticals is a mess with a large amount of debt and some extremely negative views toward it from investors and Wall Street alike.

And since it is a drug company, its future success is all about the pipeline. Valeant does have some potential there, but it could be years down the road and many are still questioning just how solid the pipeline really is.

In the end, there are far too many black clouds and question marks shrouding VRX stock for me to even consider looking at it right now.

I don’t want to catch a falling knife.

Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.