Teva Could Go to $64 or $74, This Chart Shows

As usual, there is a lot of touting battles between bulls and bears regarding Teva Pharmaceutical Industries (TEVA) - Get Report , like there is nearly daily on nearly every other stock, sector, and market index. If you had to decide today what to do about TEVA, though, what you you base your decision on? 

One way to take the emotions, anxiety, news, earnings, analysts estimates, and he said/she said rationalizations out of the process is to look at the empirical history of not only TEVA, but also that of most other liquid and active companies. This is what our decision support engine does by using only objectively derived indicators to quiet the noise. 

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Here is the monthly bar chart of TEVA, now showing the most oversold stochastics condition since this chart began (2005), but actually since 1998; the last time the stochastics dipped under the 10% oversold extreme threshold! On this particular chart, this is the most oversold condition since 2011, which was also the last time a corrective decline of this degree of trend bottomed. This can be seen by the decline into 2010, then 2011, which form an Elliott Wave ABC "zigzag" structure. These two combine to create a condition where selling is not indicated; in fact, buying is. 

Notice that price just dipped into the higher of two green boxes, and is now likely headed to at least the lower of two red ovals. This bounce should target 30% of rise off the 50 level. Once up there, DSE's algorithms will evaluate whether more gains are probability ranked higher than at least a multi-week, or longer, decline, and whether or not that decline is just a correction, or something with more ominous implications. 

Today, in our live-market Trading Room, members are being alerted to the current buy signal in TEVA, that was triggered as price moved back above 51.50, which was the lower 2 standard deviation band (containing 95% of normality), after closing below this statistical extreme Friday. In addition, TEVA also closed below the lower Bollinger Band Friday, and is back above it, too. While another dip into the high 40's can't, yet, be ruled out, it's neither required, nor currently favored. 

Therefore, selling actions are no longer indicated, as they have been for the past six months. Rather, if short, DSE strongly suggests using 54 as your protective buy stop, to keep your margin clerk on your side of the table. If flat, you can use that level to establish long exposure, as well as any quick dip toward 51.50. For safety, you can use 50.01 as your sell stop on longs, and prepare to return to long exposure around 48 +/-1, using 46.01 as your sell stop. 

Feel free to contact us at support@dsetrading.com for continuing updates on this play, or await updates in these pages. 

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.