Valeant Pharmaceuticals (VRX) Stock: No Bottom in Sight

Big positions in the stock could overshoot technical parameters in either direction, but the next support in the chart right now is shockingly low.
By Bruce Kamich ,

NEW YORK (TheStreet) -- The media coverage around Valeant Pharmaceuticals (VRX) has become a Clash of Titans-type spectacle between visible hedge fund managers with a high tolerance for risk and a Web publisher/researcher who compares it to Enron (a firm I interviewed with years ago -- a story best told over drinks).

Despite a huge percentage decline in the past three months, VRX has not shown any signs that it may have reached a low or bottom. In this first chart of VRX, above, we can see the three-month slide. VRX broke below the 50-day simple moving average in August and then for the next several weeks rallies to the underside of the 50-day MA failed. When prices closed below the $220 support level the selling accelerated with prices quickly sinking to $160 before a brief period of stability.

Liquidation was not heavy until the next decline to $90 from $180. Note the rapid decline in the On-Balance-Volume line in the latter half of October. Many times when prices head into what becomes a low you see the rate of decline in prices slow and this can be seen with a higher low from a momentum study or indicator. VRX's decline in October shows no sign of slowing, so far.

In this longer-term chart of VRX, above, we can see that VRX broke support in the $135 to $105 area. The next major support area on the chart is the $45 to $30 area from 2011-2012. This is not a forecast that VRX will decline to that area. It is just an observation about the chart of VRX. As big positions in VRX move around it will be easy to overshoot technical parameters in either direction. Readers may want more clarity on where prices are headed but that may not be practical in this particular instance.

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