Valeant Pharma (VRX, VRX.TO) has been the world's best whipping post for buy and hold investors. High-profile investors like Pershing Square have had this millstone stock dropping 90% from the highs. But every now and then, even a "sleeping dog" stock starts to improve. Valeant has some interesting traits going for it for bottom fishers. You might need some headache medicine to own it, but from a technical standpoint, it has some redeeming features.
First of all, it has been the worst stock for over 6 months. Anyone who wanted to sell it has had plenty of reasons to let it go. The SCTR has been at zero. The stock price continued to trend down but an interesting support/resistance level at $25 has formed. The volume candle for today is the largest positive day candle on the chart. The price action today also confirms the positive break of the downtrend and the positive break of the horizontal support and resistance area. The most important component for me is how the momentum shown in the PMO has turned up and could potentially go positive this week. I outlined a couple of tests around the zero line by the PMO in green and you can see the major reversals lower. The current momentum looks a lot more constructive.
All that to say, Valeant has already gained 50% off the low! So for technicians who bottom fish, there looks to be a final low on the stock. I think trading it against the $25 level is the best bet. Above $25, I can hold. Below $25, I would let someone else own the stock. Valeant also trades in Canada as VRX.TO.
Good trading,
Greg Schnell, CMT, MFTA.
