Teva Stock Flashes Bearish Signal Once More

TEVA has run up to a trendline with bearish implications in the past

Managing Editor
Oct 17, 2018 at 2:30 PM
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Drugmaker Teva Pharmaceutical Industries Ltd (NYSE:TEVA) is lower today, down 4.7% to trade at $21.24, amid reports that Express Scripts (ESRX) excluded Teva's migraine drug from coverage. In addition to the drop today, TEVA recently flashed a bearish signal, indicating the slide may be far from over.

Teva stock, for the second time within a month, is within one standard deviation of its 40-day moving average, after a lengthy stretch below this trendline. In the past three years, there have been 11 other signals of this kind, after which Teva shares were down by an average of 4.8% a month later, and positive only 27% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Daily Stock Chart TEVA

TEVA's drop today likely snaps a three-day winning streak. Another 4.8% drop in the next month would have the stock breaching the $21 level, which has recently emerged as support the last two months.

There is ample room aboard the bearish bandwagon in the event of a TEVA downturn. Short interest fell by 11% in the most recent reporting period, to 31.8 million shares -- the lowest since July 2017.

The good news for options traders is that TEVA sports a Schaeffer's Volatility Scorecard (SVS) of 93 out of 100, which shows the stock has tended to make larger-than-expected moves on the charts compared to what the options market had priced in. In simpler terms, it may be an opportune time to speculate with Teva options.

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