Mylan (MYL) - Get Report , the global generic pharmaceuticals company, reported Tuesday stronger-than-expected profit for the third quarter. The stock is in recovery mode as its weekly chart shifted to positive on Monday. Buy the stock at the market and add to positions on weakness to its monthly value level at $15.75. Book profits on strength to its fourth-quarter risky level at $28.73.
Mylan is generating increasing sales from its stable of generic drugs and is launching new products. Here's how TheStreet covered the earnings report including an update on its EpiPen product.
The stock closed Monday at $19.74, down 28% year to date and in bear market territory 38.8% below its 2019 high of $32.23 set on Feb. 20. The stock is in recovery mode, up 17.5% from its May 31 low of $16.80. The stock is extremely cheap with a P/E multiple of just 4.47, according to Macrotrends.
The Daily Chart for Mylan
Courtesy of Refinitiv XENITH
The daily chart shows that Mylan had a tough time over the past 52 weeks until beginning a recovery from its May 31 low of $16.80. The stock gapped lower on Feb. 27 on a negative reaction to earnings. The downside accelerated on a negative reaction to earnings on May 7. On Dec. 31 the stock closed at $27.40 which was an input to my proprietary analytics. The annual risky level is well above the chart at $53.98. The close of $19.04 on June 28 was another important input to my analytics and the second half value level is well below the chart at $2.85. We must therefore focus on the shorter time horizons. The close of $19.78 on Sep. 30 was input to my analytics and its fourth quarter risky level is $28.73. The close of $19.15 on Oct. 31 was the latest input and the value level for November is $15.75.
The Weekly Chart for Mylan
Courtesy of Refinitiv XENITH
The weekly chart for Mylan is positive with the stock above its five-week modified moving average of $19.43. The stock is well below its 200-week simple moving average or "reversion to the mean" at $35.78 last tested at $47.19 during the week of Jan. 26, 2018 as a selling opportunity. The 12x3x3 weekly slow stochastic reading is projected to rise to 33.54 this week up from 31.81 on Nov. 1. At the May 31 low this reading was below 10.00 at 6.09 making the stock technically "too cheap to ignore."
Trading Strategy: Buy Mylan at the market add to positions on weakness to its monthly value level at $15.75. Reduce holdings on strength to its quarterly risky level at $28.73.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sept. 30 established the level for the fourth quarter.
The close on Oct. 31 established the monthly level for November as monthly levels change at the end of each month.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
How to use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.