TEVA Stock Extends Slide After Bear Note

The drug stock is stuck in a seven-day slide

by Patrick Martin

Published on Sep 7, 2018 at 9:53 AM

The shares of Teva Pharmaceutical Industries Ltd (NYSE:TEVA) are down 2% to trade at $21.32, after Credit Suisse downgraded the drugmaker to "neutral" from "outperform." The analyst in coverage also trimmed their price target to $23 from $25, and expressed concern that the Food and Drug Administration (FDA) will not approve the company's migraine drug.  

Teva stock nabbed an annual high of $25.96 back on Aug. 21, after the FDA approved the company's EpiPen generic. Since then, however, TEVA has pulled back, paring the gains from that mid-August bull gap. Today's drop has the shares testing their 160-day moving average for the first time since May, and on track for their seventh straight loss. 

In the options pits, call buying has been quite popular. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the 10-day call/put volume ratio of 3.16 ranks in the 93rd percentile of its 12-month range. Not only does this show that calls outnumber puts by a healthy three-to-one margin, but the high percentile rank indicates the rate of call buying relative to put buying has been quicker than usual.

Digging deeper, the September 23 call saw the largest increase in open interest during this time frame, with more than 7,700 contracts added. Data from the major options exchanges confirms buy-to-open activity here, indicating options traders are expecting TEVA to climb higher in the next two weeks.

Meanwhile, Teva stock has consistently rewarded premium buyers over the past year. This is per the stock's Schaeffer's Volatility Scorecard (SVS), which is currently docked at an elevated 97 out of a possible 100. This suggests that TEVA has regularly made larger-than-expected moves on the charts, compared to what its options were pricing in.

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