MYL Stock: Bears Are in Control
Mylan NV’s (NASDAQ:MYL) “EpiPen” controversy has put a serious damper on this company’s stock—and the sector in general—as politicians express concerns about the pricing policies that biotech firms instill upon the people who need their products the most.
My analysis below has everything to do with the price of Mylan stock and nothing to do with the company’s controversial pricing polices that have upset the world and have set the media ablaze.
I have spent years creating an investment strategy that requires an objective systematic approach. This process involves using multiple signals and time horizons to support my trading bias. This process has kept my trading disciplined and void of emotions.
The signals that I generated are from the price charts, with price patterns that look ominous at best, and I am bearish on Mylan stock as a result. I am expecting the price of MYL stock to get worse before it gets better.
The following Mylan stock chart supports my bearish view.
Chart courtesy of StockCharts.com
There are numerous signals on the chart above that support my bearish views on Mylan stock.
In July 2015, MYL stock put in a breakaway gap on the price chart. Breakaway gaps rarely get filled and almost always signal that a new trend has started. The gap also occured at a price point that represented a level of long-term support for Mylan stock. This was the first sign that the bull market in MYL stock had stalled.
In August 2015, MYL stock generated a death cross. A death cross is a bearish signal that is produced when a 50-day moving average, highlighted in blue, crosses below a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bear market is on the horizon and this signal serves to confirm that the bull market that dominated trade in previous years had ended.
My attention is completely drawn to the horizontal trend line marked “support.” This level is very defined and I can speculate about the number of stop-loss orders that sit just below this level. A break below support will be like opening a trap door beneath one’s feet; a swift fast drop is expected.
The following Mylan stock chart illustrates the long-term level of support.
Chart courtesy of StockCharts.com
The line highlighted in yellow illustrates the trend that dominated trade shortly after Mylan stock bottomed in 2008. This line represented the bull market in MYL stock. This trend was broken when Mylan stock gapped lower in July 2015, and this event is highlighted as a breakaway gap on the first chart I provided.
This event signaled that the bull market run had ceased and that the odds of a possible trend reversal had increased. The signals that followed confirmed the new bearish trend toward lower prices.
The horizontal trend line highlighted in blue is the main focus of the above chart. It represents a major level of support for Mylan stock. This trend line will be targeted by bulls and bears alike. One camp is likely waiting to buy at this level, and the other would love nothing more than to cover their shorts at this prevailing price. Irrespective of which camp one is in, this level is to be watched, as a break of support that is outlined on the first chart would no doubt put this level in play.
The Bottom Line on Mylan Stock
I am bearish on Mylan stock, and I am expecting things to get worse with regards to the share price before things better. When and if my bearish target of $25.00 is attained, I will reassess my bias on MYL stock.