Pfizer Beats Estimates, but Stock Is Below Monthly Risky Level

Pfizer Inc. (PFE) beat earnings per share (EPS) estimates when it reported results on April 28, but the stock ended last week below its monthly pivot for May at $38.23. The stock has a positive weekly chart and is trading above its 200-week simple moving average (SMA), or reversion to the mean, at $37.10.

The pharmaceutical giant is a component of the Dow Jones Industrial Average, and Pfizer stock is one of the Dogs of the Dow for 2020. Its P/E ratio is 13.23, with a dividend yield of 3.96%, according to Macrotrends.

Pfizer stock ended last week at $38.36, down 2.1% year to date and in correction territory at 17.5% below its 52-week high of $46.47 set on Dec. 4, 2019. The stock is also in bull market territory at 37.6% above its March 23 low of $27.88.

The daily chart for Pfizer 

Daily chart showing the share price performance of Pfizer Inc. (PFE)
Refinitiv XENITH

The daily chart for Pfizer shows the confirmation of a death cross on Aug. 7, 2019, when the 50-day SMA fell below the 200-day SMA to indicate that lower prices would follow. The stock crisscrossed the 200-day SMA between Dec. 16 and Jan. 18 before slumping to its March 23 low of $27.88.

On the rebound, Pfizer stock returned to its 200-day SMA on April 23, but it ended last week below its pivot for May at $38.23. The stock is well below its quarterly and semiannual risky levels at $42.33 and $43.08, respectively, with its annual risky level above the chart at $47.22. This week's value level is at $34.14, and the stock is above its 200-day SMA at $36.75.

The weekly chart for Pfizer

Weekly chart showing the share price performance of Pfizer Inc. (PFE)
Refinitiv XENITH

The weekly chart for Pfizer is positive, with the stock above its five-week modified moving average of $37.10. The stock is above its 200-week SMA, or reversion to the mean, at $35.65.

The 12 x 3 x 3 weekly slow stochastic reading rose to 60.32 last week, up from 49.34 on April 24. At the all-time intraday high of 46.47 set during the week of Dec. 7, 2018, this reading was above 90.00, putting the stock in an inflating parabolic bubble formation, and bubble always pop.

Trading strategy: Buy Pfizer shares on weakness to the 200-week SMA and 200-day SMA at $37.10 and $36.75. Reduce holdings on strength to the quarterly, semiannual, and annual risky levels at $42.33, $43.08, and $47.22, respectively.

How to use my value levels and risky levels: The closing prices on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

The second quarter 2020 level was established based upon the March 31 close, and the monthly level for May was established based upon the April 30 close. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels remain in play all year long.

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.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting 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. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered "too cheap to ignore," which is typically followed by gains of 10% to 20% over the next three to five months.

Want to learn how to integrate trading levels into your everyday trading strategy? Check out my new publication, 2-Second Trader.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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