Mylan N.V. (MYL), the global generic pharmaceuticals company, reported quarterly results before the opening bell on Tuesday, May 7. The company beat analysts' earnings per share (EPS) estimates but could not offer guidance on how its turnaround story is going to reverse the trend of declining sales.
The stock closed Monday, May 6, at $28.26, up 3.1% for the year but in bear market territory at 31.1% below its June 14 high of $40.99. The stock set a new 52-week low on Tuesday at $22.50. This was a gap below its semiannual pivot at $27.05 and indicates risk to its monthly value level at $20.37. This is also a multi-year low. The stock is relatively cheap with a P/E ratio of 6.12, according to Macrotrends.
The daily chart for Mylan
The daily chart shows that Mylan has been below a "death cross" since June 21, when the stock closed at $38.63. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average, indicating that lower prices lie ahead. The stock was above its 50-day simple moving average at Monday's close at $27.47. Note that the stock also gapped lower on Feb. 27 on an earnings miss.
On Dec. 31, Mylan shares closed at $27.40, which was an input to my proprietary analytics. Still in play is my semiannual pivot at $27.05, which was a magnet between Feb. 27 and May 2. The close of $28.34 on March 29 was another input to my analytics, and a quarterly risky level remains at $30.01. The close of $26.99 on April 30 resulted in a monthly value level at $20.37, which represents the downside risk in May.
The weekly chart for Mylan
The weekly chart for Mylan is positive, with the stock below its five-week modified moving average of $26.97. The stock is well below its 200-week simple moving average, or "reversion to the mean," at $39.92, last tested at $47.19 during the week of Jan. 26, 2018, as a selling opportunity. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 21.83 this week, down from 22.65 on May 3. An oversold reading below the 20.00 threshold is likely in a week or two.
Trading strategy: Buy Mylan stock on weakness to its monthly value level at $20.37 and reduce holdings on strength to the semiannual pivot at $27.05 and to its quarterly risky level at $30.01.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March and April. The quarterly level was changed at the end of March.
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 shares 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 their time horizon expires.
The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.