Bull Signal Flashing for BHC Stock After Analyst Upgrade

BHC shares are on the cusp of oversold territory

Deputy Editor
Aug 15, 2019 at 1:39 PM
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Canada-based drugmaker Bausch Health Companies Inc (NYSE:BHC) is hovering atop breakeven today, despite an upgrade from TD Securities to "buy" from "hold," per TheFly.com. This upgrade comes on a dip for BHC, which has lost 11.6% so far this month. However, during this sell-off the equity did trigger a historically bullish signal that could indicate a bounce on the charts. 

Specifically, the stock just came within one standard deviation of its 80-week moving average, after a lengthy stretch atop the trendline. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, this has happened 11 times before. BHC was higher three months after these signals 70% of the time, and averaged a gain of 7.2%. A similar move, from its current perch at $21.06, would put the pharma concern back atop the $22.50 level -- a region that it's been struggling beneath this month. 

In addition, BHC could find a familiar foothold in the $20.50-$22 neighborhood. This area has contained most of the stock's pullbacks over the past year, with the exception of a late-December sell-off. Plus, a short-term bounce could be in the cards for BHC, based on its 14-day Relative Strength Index (RSI) of 31 -- which sits just on the cusp of "oversold" territory.

BHC chart aug 15

TD Securities isn't the only analyst firm banking on a bounce for the security. Nine of the 13 in coverage say the stock is a "buy" or better. Plus, the consensus 12-month price target of $30.73 represents a 46% premium to current levels. 

Elsewhere, short sellers have been hitting the exits. Short interest fell nearly 10% in the last two reporting periods, and now the 9.99 million shares sold short represent only a slim 2.8% of the stock's available float.

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