Politicians love to tweet. Sometimes they do so to hurt their opponents politically, sometimes they end up doing damage to themselves, but more recently, one prominent politician has been using Twitter Inc (NYSE:TWTR) to attack companies he believes are conducting unfair business practices.
That politician is Bernie Sanders, and while he won’t be on the ballot next Tuesday, that has not stopped him from campaigning against pharmaceutical companies — some of which you may be holding in your portfolio.
He has railed against Mylan NV (NASDAQ:MYL) for raising the price of its EpiPen and has called out Eli Lilly and Co (NYSE:LLY) and Novo Nordisk A/S ADR (NYSE:NVO) for the prices they charge for their own insulin products. However, while the tweets have garnered the most media attention, investors should be more concerned with the price action these stocks have seen recently.
Today, we’re going to cover the technical condition of those three stocks, with the help of Profit Scanner powered by Recognia, in an attempt to determine where their prices may be headed.
Big Pharma Stocks to Watch: Eli Lilly (LLY)
Eli Lilly is a $79 billion drug-manufacturer that offers an insulin product called Humalog, which is a fast-acting form of insulin that works by lowering patients’ blood glucose levels.
On Nov. 1, Profit Scanner identified a Double Moving Average Crossover on shares of LLY. When a shorter-term and longer-term moving average cross each other, a bullish or bearish signal is generated depending on the direction of the crossover.
In the case of LLY, its shorter-term 21-day moving average crossed below its longer-term 50-day moving average, which generated the bearish signal.
Moving averages are lagging indicators because they use historical information, so they should not be interpreted as signals to go long or short. However, they are helpful in determining which direction a stock’s momentum is heading, and for LLY, the direction is to the downside.
Big Pharma Stocks to Watch: Mylan (MYL)
Mylan is a global pharmaceutical company that may be best known for its EpiPen injector, which is meant to treat severe asthma attacks and allergic reactions.
After falling from the $50 level to roughly $36 per share from August to the start of October, shares began to consolidate within a Symmetrical Continuation Triangle pattern. This pattern is characterized by a downtrending resistance level that is connected by a series of lower highs and a lower uptrending support level that is connected by a series of higher lows.
Because this is a continuation pattern, it tends to resolve in the same direction the stock was moving prior to the consolidation period, which in this case is to the downside. This pattern is confirmed when the price of the stock breaks out of the triangle formation to close below the lower ascending trendline.
MYL broke below the uptrending support level on Oct. 31, and the stock has fallen about 3% since then. The company is scheduled to report earnings on Nov. 9 after the market closes, and barring a blow-out quarter, the trend for MYL is likely to remain bearish.
Big Pharma Stocks to Watch: Novo Nordisk (NVO)
Novo Nordisk, like LLY and MYL, is a pharmaceutical company that focuses on diabetes and insulin products, and its stock has fallen in sync with its embattled peers recently.
On Oct. 28, Profit Scanner identified a bearish MACD (Moving Average Convergence Divergence) crossover. The MACD is the difference between a 26-day and 12-day exponential moving averages, and a 9-day exponential moving average called the “signal line” is plotted on top of the MACD to show bullish and bearish signal points.
A bearish signal occurs when the MACD falls below the signal line and, as you can see in the chart below, Profit Scanner alerted users to this signal last Friday.
The stock has fallen about 3% since the signal was generated. However, when the same signal was identified back in September, the stock dropped more than 10% before the selling abated.
With the backdrop of a weak market overall, combined with the additional scrutiny of “Big Pharma” recently, bearish traders could pocket further gains by taking a short-side position here.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.