Valeant Pharmaceuticals Intl Inc (VRX) Stock Is Seeing a Lot of Quiet Buying

Advertisement

To say Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has had a rough past couple of years would be a considerable understatement. Still down more than 90% since its August 2015 peak despite the rebound from less than $9 in April to its current price near $17, VRX stock has been nothing but miserable for long-term investors to hang onto.

A Lot of Folks are Quietly Buying Valeant Pharmaceuticals Intl Inc (VRX) Stock

Things are different now, however, and not just for the company. Whether anybody wants to admit it or not, genuine bullish interest in VRX stock has swollen since things hit rock bottom three months ago. Many (though not all) indications are that the worst for Valeant Pharmaceuticals is in the rear-view mirror.

From Riches to Rags…

Just for the record, I warned traders way back in August of 2015 that Valeant was sitting on a debt time-bomb, exacerbated by a poor business model that would eventually catch up with it.

Though many people — presumably owners of VRX stock — voiced disagreement with my thesis, in retrospect we now know that by that time, the peak had already happened. Valeant stock had already started its implosion. Within a matter of months, the government along with then-Presidential candidates took dead aim at sky-high drug prices, Valeant got (properly) called out for a sham relationship with a pharmacy outlet, and its CEO would be ousted for letting the company spin out of control on multiple fronts.

As they say though, nothing lasts forever.

… But Back to Riches?

Calling ’em like I see ’em, VRX stock deserved the beating it took. It’s curious though … revenue continued to flow, and at least operationally, Valeant remained viable.

Granted, it has been and will continue to be ugly at times. The shedding of assets will address its $30 billion debt problem, but at the same time crimps its ability to drive the very revenue it needs to even have a chance at turning some of its revenue into a profit. At the very least though, relatively new CEO Joseph Papa’s turnaround plan is legitimate.

The real bullish clue here, however, isn’t the company’s improving results. It’s the market’s genuine renewed bullishness on VRX stock.

There’s an old saying — follow the money. The idea is simply to trade in the same direction other traders are increasingly betting their money, rather than just trading the media’s rhetoric. It costs nothing to voice an opinion about a company’s future. Putting cash on the line speaks volumes in and of itself.

To that end, investors have been and continue to pour money into new Valeant stock positions. A lot of it.

The Chaikin Money Flow indicator isn’t one of the commonly-used go-to trading tools, even for the most seasoned of chart technicians. It’s a potent tool all the same though, as it measures the amount of trading volume behind a stock’s daily movement, up or down. If it’s rising, a lot of investors are buying on strong volume, and there’s not much volume behind any selling. That’s the kind of subtle clue you’d want to see if you’re mulling a new position in a particular equity, in that it indicates there’s something of a bullish crowd forming around that stock.

Valeant Pharmaceuticals’ stock’s Chaikin line has been rising rather decisively since May. Even without the Chaikin Money Flow indicator edging higher though, we can see a string of high-volume accumulation weeks since May.

VRX stock chart
Click to Enlarge

It’s interesting and noteworthy simply because it’s something we haven’t seen in a long time.

Along with the growing amount of bullish volume, we’re encouraged by the recent cross above the 200-day moving average line at $15.40. That’s something we haven’t seen since the fall of 2015.

Bottom Line for VRX Stock

To be fair, we’ve been fooled before. We saw some high-volume buying in August of last year, and that didn’t go anywhere.

Not every shoe had dropped at that point though. Nearly a year later, there’s not much out there we don’t know about Valeant, good or bad. A bunch of people — possibly institutions — are buying it anyway. What do they know that you don’t?

The proverbial clincher here would be the point where the 20-bar Chaikin Money Flow line crosses above zero. We’d also like to see the 200-day moving average line be verified as a support level as well. These are all things that are within reach though, at least earning VRX stock a spot on your watchlist. The perception tide is turning, even if few have noticed, and even fewer are talking about.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/valeant-pharmaceuticals-intl-inc-vrx-stock-wringer/.

©2024 InvestorPlace Media, LLC