MYL Stock: Pattern Breakdown
Mylan NV (NASDAQ:MYL) stock has been a media darling for some time, and for all the wrong reasons. The price of the “EpiPen” skyrocketed in recent months and this news only served to increase the scrutiny received by this sector, as accusation of price gouging has reached political heights. Both presidential candidates have vowed to curb these practices, and as a result, the biotech sector has been pushed into a bearish tailspin.
Add the uncertainty with regards to a political election and a looming fed interest rate hike, and the markets have every reason to test lower levels. This will exacerbate the selling pressure in already beaten-down sectors, and Mylan stock is set up for further losses.
I have focused on MYL stock in the past because it was setting up a bearish pattern that was set to execute if the price closed below a level of support. There is no long an “if.” The price of Mylan stock has closed below this level and the bearish pattern is now confirmed. Lower prices are expected.
The following Mylan stock chart illustrates the bearish pattern I am referring to.
Chart courtesy of StockCharts.com
The Mylan stock chart above illustrates that a bearish pattern has just been completed. This breakdown was confirmed when the price closed below the horizontal trend line labeled support. It took three attempts before this level finally broke, and it was this level of support at $37.50 that I anticipated was going to give.
My bearish view on MYL stock began when a death cross was generated in August 2015. A death cross is a bearish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses below a slower 200-day moving average (highlighted in red). Traders use this signal to confirm a bull market is on the horizon. I find it wise to trade in the direction of this momentum indicator.
The moving average convergence/divergence (MACD) indicator is still bearish and the moving averages are expanding, indicating that the bearish trend is once again gaining momentum. The trend towards lower prices is looking to accelerate.
The following Mylan stock chart illustrates the long-term picture, and a level that I believe will act as support.
Chart courtesy of StockCharts.com
The MYL stock chart above illustrates that the bullish run off the 2009 financial crisis lows ended in July 2015, when the trend line that supported shares during the entire bull run was finally broken. The breaking of this trend line was also responsible for generating the death cross that was highlighted on the first chart.
This trend line breaking indicates that a trend reversal is in play and that lower prices are the path of least resistance. The horizontal trend line marked support is the level I would assume that the stock will finally find price support.
This level previously acted as a major level of price resistance, and it stood for a decade before it was finally broken. Price has a habit of returning to test a previous level of resistance from above in order to confirm that this level is now support, and I do not believe that this time will be any different. I am eagerly awaiting a test of $25.00 on MYL stock.
Bottom Line on MYL Stock
I am bearish on Mylan stock as it has now confirmed a bearish breakdown on its price chart. I would welcome a test of $25.00 at which point I will reassess, and possibly reconsider my bearish view on MYL stock.