Pharmaceutical giant Bristol-Myers Squibb Co. (BMY: sentiment, chart, options) has been a strong performer recently. The security has bounced off its October 10 low of $16, and has created a series of higher lows as it has rallied more than 31%. However, the stock is facing staunch resistance at the 23 level -- an area that has acted as both support and resistance since late January.
From a longer-term perspective, we find that the equity has rallied into resistance at its declining 10-month moving average. BMY has not logged a monthly finish above this trendline since December 2007. This is definitely a resistance area worth watching, as a close above it could signal longer-term strength in the shares.
Bristol-Myers Squibb is a pharmaceutical concern with a number of blockbuster drugs. Some of the firm's cardiovascular drugs include heart disease drug Plavix, as well as Pravachol (which lowers cholesterol) and Avapro (for hypertension). The firm also makes the antipsychotic medication Abilify, and drugs in a number of other therapeutic categories, particularly oncology, virology (including HIV), and autoimmune disease. Through its Mead Johnson subsidiary, BMY makes Enfamil infant formula and other nutritional products for children.
The shares of BMY are up nearly 3% this morning after Citigroup upgraded the shares from "hold" to "buy." Overall, Wall Street is somewhat bearish toward the shares. Zacks reports that the stock has earned 7 "buy" ratings and 9 "holds." Any additional upgrades from this dour group could help to propel the shares higher.
Another sign that expectations are low comes from the stock's average 12-month price target. Thomson Financial reports that the security's price-target estimate stands at $22.45, just 6% above the stock's current trading price. Positive price-target revisions from Wall Street could act as a catalyst for fresh buying of the shares.
Wall Street isn't the only group with its doubts about the shares. The Schaeffer's put/call open interest ratio for BMY stands at 0.61, which is in the 85th percentile. This lofty reading indicates that investors have been more pessimistically aligned toward the shares just 15% of the time during the past 12 months. An unwinding of these bearish bets could help to fuel a significant rally in the shares during the near term.
Short sellers are also growing more skeptical of the drug company. Since hitting a near-term low of 14.85 million shorted shares at the end of September, the number of BMY shares sold short has skyrocketed more than 36% to 20.23 million shares.
Overall, traders should keep a close watch on potential resistance at the 23 level. A breach of this barrier could finally succeed in winning over the bears, resulting in a fresh wave of buying pressure.
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