Stocks are ready to continue last week’s recovery as traders continue to look for opportunities to buy the short-term dip caused by the political headlines from last week. While there are some deals to be had there, traders should avoid certain “pitfall stocks” that, while down, are not “buy the dip” opportunities, but instead risks.
Today’s three big stock charts look at the charts of Bristol-Myers Squibb Co (NYSE:BMY), Pfizer Inc. (NYSE:PFE) and Amgen, Inc. (NASDAQ:AMGN). These three healthcare-related companies are presenting themselves as a potential technical buy, but buyers should beware.
Bristol-Myers Squibb Co (BMY)
Shares of Bristol-Myers Squibb looked to be a rally candidate in April, only to top out in the beginning of May as the technical traders came into play.
BMY stock hit an overbought reading of its RSI at the same time that the stock was running into its 200-day moving average. At that time, this longer-term trendline was locked-in a strong downtrend and the combination was enough to throw Bristol-Myers Squibb shares back into their bearish trend.
Now, BMY stock is facing overhead pressure from the combination of the 50- and 200-day moving averages. This combination should be deadly as traders appear to still be selling into rallies.
Bristol-Myers Squibb stock is close to an oversold reading from the looks of the RSI; however, our take of the chart is that this will result in a consolidation rather than a rally. Either way, BMY shares are due for more selling with a target of $50.
Pfizer Inc. (PFE)
Another technically challenged company within the Pharma group are the shares of Pfizer. The chart watchers are getting ready to jump out of their seats for PFE, and for the short-term they may be able to profit, but the outlook beyond a few weeks is dim.
Pfizer shares are registering an RSI reading of 30.27 after dipping as low as below 20. Those readings were the most oversold indication for the stock since January 2017, ahead of a 13% run in the stock.
The situation has changed a bit from then though. First, the 50-day trendline. This — the most important trendline (from our perspective) — was trending higher in January, which indicated a bullish outlook for PFE stock from a trading perspective.
Currently, the 50-day for Pfizer stock is trending lower, indicating that resistance is on its way. The key trendline sits at $33.50 right now, which gives some upside potential for those willing to take a swing at a quick trade.
Between the current price and the 50-day sits the 200-day moving average. This trendline is in the process of transitioning into a longer-term bearish outlook. Pfizer stock will have to break above this mark at $32.60 before we can get that extra push to $33.50.
Based on these indications, even the aggressive traders are likely better on the sidelines when it comes to Pfizer for now, unless you’re looking for a shorting opportunity.
Amgen, Inc. (AMGN)
Some headlines dealing with one of Amgen’s trial drugs has the stock moving 2.1% lower in first few hours of trading. There is some technical damage involved with this move that compounds our already bearish view of AMGN stock.
First, today’s move breaks Amgen shares below their lower Bollinger Band. This means that we’re likely to see an increase in selling volatility on the stock. AGMN was already seeing some volatility, so this ride could get wild.
Backing-away from today’s activity, Amgen’s 50-day moving average has already moved into an intermediate-term bearish pattern. This forecasts a price for AMGN shares that is likely to strike as low as $140 over the intermediate-term outlook.
Trading volume on the buying side, when we see it, has been light. This is because AMGN stock is also teetering on moving into a long-term bear market trend. Amgen’s 20-month moving average sits at $153.85. A move below this trendline will break AMGN into a long-term bear market.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
