Pfizer Inc. (PFE) reported better-then-expected earnings on April 30, and shares of the pharmaceutical giant responded with an upside move. However, the stock is under a "death cross" on its daily chart and still trades under a negative weekly chart.
Pfizer is a component of the Dow Jones Industrial Average and is one of the eight members of the "Dogs of the Dow" for 2019. The company has a P/E ratio of 13.19 with a dividend yield of 3.55%, according to Macrotrends. Pfizer shares closed Wednesday, May 1, at $40.77, down 14.1% year to date and up 18.6% from the low of $34.37 posted on May 4, 2018. The stock is in correction territory at 12.3% below its Dec. 4 high of $46.47.
The daily chart for Pfizer
The daily chart for Pfizer shows that a "death cross" was confirmed on April 22, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices lie ahead. Under this warning, the strategy is to sell strength to the 200-day simple moving average, now at $42.33.
The close of $43.65 on Dec. 31 was input to my proprietary analytics and resulted in a semiannual pivot $41.49 and an annual risky level at $48.44. The close on March 29 at $42.47 was an input that generated a quarterly risky level at $43.55. The close of $40.61 on April 30 resulted in a monthly risky level at $44.37.
The weekly chart for Pfizer
The weekly chart for Pfizer is negative, with the stock below its five-week modified moving average of $41.73. The stock is above its 200-week simple moving average, or "reversion to the mean," at $35.72. The 12 x 3 x 3 weekly slow stochastic reading is projected to fall to 42.90 this week, down from 49.15 on April 26.
Trading strategy: Buy Pfizer shares on weakness to the 200-week simple moving average at $35.72 and reduce holdings on strength to the semiannual, quarterly and monthly risky levels at $41.49, $43.55 and $44.37, respectively.
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.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.