It's been a rough year to own shares of drug maker Allergan plc (AGN) .

Since the calendar flipped to January, this $59 billion pharma stock has shed around 12% of its market value, underperforming a 15% rally in the S&P 500 by a significant margin -- and trailing the rest of the pharma industry by even more.

All told, Allergan is the second-worst performing health care stock in the S&P 500.

But today, after Allergan reported positive third-quarter earnings numbers, investors are finally getting a glimmer of hope. Shares are up 5% on the heels of the earnings release.

Allergan posted third-quarter profits of $4.15, adjusted for one-time charges. That number came in ahead of the $4.05 that Wall Street analysts were hoping for, on average. The bigger problems are waiting in the weeds. For starters, Allergan is preparing itself for the possibility of a generic challenge to its blockbuster eye drug Restasis as early as 2018.

Allergan announced Wednesday that it would take a $3.2 billion write-down related to the drug following a federal ruling that some of its patents were invalid.

In the short-term, though, the real battle to watch for in Allergan is coming from the price action itself:

It doesn't take a technical trading expert to figure out that shares of Allergan have been under pressure in recent months. Since the end of July, this big drug stock has been selling off in a well-defined downtrending channel, dropping on every test of higher ground. Even worse, shares broke through long-term support at $185 in the middle of October, turning that long-term price floor into a potential price ceiling on the way back up.

That's the bad news.

The good news is that Allergan's Q3 earnings pop is putting the possibility of a change in trend back in play, as shares flirt with that $185 level. As I write, shares are sitting slightly above that line in the sand, just not quite enough to call it a material break above $185.

More evidence that it's too early to turn totally bullish on Allergan comes from relative strength, the side-indicator down at the bottom of this stock's chart. Our relative strength gauge continues to be in a downtrend after rolling over back in the summer -- until that downtrend in relative strength changes, AGN remains predisposed to underperform.

All of that said, a material breakout through $185 could change everything for Allergan shareholders. If this stock can catch a bid materially above that $185 price line -- and more specifically, if shares can break out above their intermediate-term downtrend from this summer -- then we're looking at the first clear buy signal in Allergan for just about all of 2017. Keep a close eye on how AGN handles the $185 level as we finish off this week -- it's make-or-break for this pharma stock.

Allergan is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AGN? Learn more now.

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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.

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