Technical Analysis: Mylan Stock Is Making Strides Towards a Bullish Trend

Mylan stock
Credit:iStock.com/Peshkova

MYL Stock: Mind the Gap

Mylan N.V. (NASDAQ: MYL) stock is rocketing higher on the heels of a U.S. Food and Drug Administration (FDA) approval of its glatiramer acetate injection. This is a generic drug that is used to treat multiple sclerosis, and it is expected to begin shipping immediately. Investors are completely enamored with the news, and they have responded by pushing the MYL stock price higher by 16.2%.

This surge in price did quite a number on the Mylan stock chart, and for someone like myself, who analyzes investments using the company’s stock chart, it definitely piqued my interest.

If this is the first time you are coming across one of my publications, let me quickly point out that my views on Mylan were generated by analyzing the company’s stock chart. This method of analysis is called technical analysis and it is predicated on the notion that historical data points can be used as indications to forecast what the future may bring.

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The following Mylan stock chart illustrates the price action that occurred following the FDA approval.

Mylan stock chart

Chart courtesy of StockCharts.com

MYL stock gapped higher on October 4, opening the trading day at $38.00. The gap on the price chart is a compelling indication on its own, as it displays investors coming to grips with the market-moving news. The factor that really piqued my interest in this name is that Mylan gapped right over its 200-day moving average.

The 200-day moving average is highlighted in red, and this metric is created by average Mylan stock’s closing price over the preceding 200 days and plotting that value on the stock chart.

This popular indicator acts like a dividing line that is used to determine whether an investment is in a healthy bullish state or an unhealthy bearish state. Deciphering between these two polar opposites is as easy as pinpointing whether the investment is trading above or below the moving average.

Prior to the favorable FDA ruling, Mylan stock was trading way below its 200-day average. Instantly following the news, The stock was trading above it. MYL stock went from being an unhealthy bearish investment to a healthy bullish one in the blink of an eye.

The 200-day moving average currently coincides with the breakeven level for the year. What this means is that in the blink of an eye, this investment went from being a really poor performer year-to-date, to one that is breaking even.

If Mylan stock can maintain its posture above the 200-day moving average, it increases the odds that a bullish trend can develop.

In order to suggest that a bullish trend is in development, I would require an applicable signal from the indicator that is highlighted on the following Mylan stock chart.

Mylan price chart

Chart courtesy of StockCharts.com

The indicator of focus on this MYL stock chart is the moving average convergence/divergence (MACD) indicator.

MACD is a simple yet effective trend-following momentum indicator. This indicator uses signal-line crossings to determine whether bullish or bearish momentum is influencing the trading action in a stock.

In order for an investment to stage a sustained move towards higher or lower prices, the applicable bullish or bearish momentum is required.

For instance, in July 2015, a bearish MACD cross was generated, which indicated that bearish momentum was influencing the trading action in MYL stock. Bearish momentum creates an environment where the path of least resistance is geared towards lower stock prices, and that is exactly what has happened.

Since that bearish cross was generated, a bearish trend has developed, consisting of lower highs and lower lows, which is the quintessential characteristic that defines a bearish trend.

In order to suggest that a new bull market is in development, a bullish MACD cross is a necessity. The lines that generate signals have converged, and if Mylan stock can maintain its stature above the 200-day moving average, it increases the odds that a bullish signal will be generated. At that point, I will be inclined to believe that a bullish trend is in development.

Analyst Take: 

Mylan stock surged following a favorable FDA decision. This surge in price caused MYL stock to close above a key technical indicator, which is serving to suggest that this investment is making strides in becoming bullish once again. I am awaiting one more indication in order to confirm the notion that a new bullish trend is once again in development.