Philip Morris Has More Downside Ahead -- Here's How to Trade It Now
Shares of Philip Morris (PM) - Get Report were slammed on Tuesday following the company's disappointing second-quarter earnings report. PM fell over 3% on the news after opening the session with a damaging downside gap. Yesterday the stock lost ground again as overhead pressure remains intense.
In the near term, PM investors should expect more downside.
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Philip Morris's post-earnings breakdown wiped out a very bullish set up. Heading into Tuesday's report, the stock was flat-lining just above a major resistance zone. With a healthy post-earnings jolt, PM would have left have had the benefit of a strong base as a new rally leg developed. Instead, shares reversed sharply, leaving behind a rather ominous top. More downside is likely needed before the damage can be repaired.
A further drop from current levels will produce a very low-risk buying opportunity for patient PM investors. The lower band of PM's four-month consolidation pattern is marked by the April, May and June lows between $96 and $97. If further losses are limited by this key support zone, PM will avoid leaving behind a mountain of overhead supply. Until this area is convincingly taken out, investors should view a retest of the second-quarter lows as a buying opportunity.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long PM.