Pfizer (PFE) Could Enter New Uptrend

Dow component Pfizer Inc. (PFE) and junior partner BioNTech SE (BNTX) have chosen their BNT162 mRNA-based vaccine candidate for advanced trials, following positive results that raise hopes for a COVID-19 vaccine. The companies have already inked deals with Canada and Japan to supply millions of doses if the compound reaches the manufacturing stage, ensuring profitability. They also expect to seek emergency use authorization in the United States as soon as October.

Key Takeaways

  • Pfizer's new vaccine candidate is showing encouraging early results.
  • The stock could enter a new uptrend in the coming months.
  • Pfizer and partner BioNTech have entered into manufacturing agreements with Canada and Japan.

While speculators chase volatile BioNTech shares, Pfizer could emerge as a big winner in the vaccine wars, potentially lifting the chronically underperforming stock to a new high. Pfizer shareholders will also sleep better at night, with the smaller stock slicing through massive trading ranges since it took off for the heavens in March. The former hot rocket is also under heavy distribution at this time, with the short-term crowd chasing the latest vaccine headlines.

Wall Street consensus on Pfizer is mixed at best, despite a "Moderate Buy" rating based upon six "Buy" and nine "Hold" recommendations. No analysts are recommending that shareholders sell their positions at this time. Price targets currently range from a low of $35 to a Street-high $55, while the stock is trading $3 below the $42 median target. While these narrow bands highlight slow-motion price action, investors are also accumulating hefty dividends that now stand at 3.96%.

Accumulation/Distribution (A/D) looks at where prices opened and closed to determine sentiment; if a market opens higher and closes lower, pushing A/D lower, then a bullish market may be weaker than it appears.

Pfizer Long-Term Chart (1987 – 2020)

Chart showing the share price performance of Pfizer Inc. (PFE)

The stock entered a historic uptrend after the 1987 stock market crash, fueled by an impressive drug pipeline that included the wildly-popular Lipitor and Viagra pharmaceuticals. The rally posted four stock splits before ending at an all-time high at $49.99 in the second quarter of 1999. A July 2000 breakout attempt stalled below the prior peak, carving the second high in a double top pattern that broke to the downside in 2002.

Pfizer stock posted major losses through the middle of the decade, settling near $21 at the end of 2005. Bearish price action broke that trading floor in 2008, dumping the stock to a 13-year low at $7.80 in 2009, while a bounce into 2010 stalled at the new resistance in the low $20s. It finally mounted that barrier in 2012, entering a shallow uptrend that posted new highs into the December 2018's 18-year high at $46.47. It then rolled into a complex decline that is still in force as we head through the third quarter of 2020.

Pfizer Short-Term Outlook

The stock carved multiple selling waves into March 2020's five-year low at $27.88 and turned higher into the second quarter. The uptick stalled less than three points below the January peak in April, yielding a steep pullback, followed by rapid upside that completed a 100% retracement into the April high. Short-term price action has now carved the outline of a bullish cup and handle pattern, with a breakout above $40 potentially signaling the end to the downtrend and continued upside into the 2018 high.

A pullback is a pause or moderate drop in a stock or commodities pricing chart from recent peaks that occur within a continuing uptrend. A pullback is very similar to retracement​ or consolidation, and the terms are sometimes used interchangeably. 

The Bottom Line

Pfizer's vaccine candidate could lift the underperforming pharmaceutical giant into the first uptrend since the end of 2018, with the potential to eventually test the 1999 all-time high.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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