The New Bull Market in Valeant Stock Has Just Begun

Valeant stock chart
iStock.com/chris czar

VRX Stock: The Path of Least Resistance Is Geared Toward Higher Prices

In January of this year, I wrote a publication titled, “Valeant Stock: 2017, The Year VRX Stock Turns It Around.” It’s now time to rejoice in this festive season because those words have finally come to fruition, and I have all the reason to believe that Valeant Pharmaceuticals Intl Inc (NYSE:VRX) stock has finally put in a bottom.

These reasons are all technical in nature, which means the indications on the stock chart are suggesting that Valeant stock is likely to appreciate.

Using indications generated on company’s stock chart in order to base a view on it is a method of analysis called technical analysis. This method is based on the notion that historical data points can be used to forecast what the future may bring. I have been using and applying this method for almost two decades and I feel am well equipped to take on the task of forecasting what is in store for VRX stock.

The first indication that suggested that Valeant stock was putting in a bottom was generated in May of this year. This indication is highlighted on the following stock chart.

Advertisement

Valeant stock chart Chart courtesy of StockCharts.com

The indication highlighted on the VRX stock chart is the moving average convergence/divergence (MACD) indicator.

MACD is a momentum indicator that uses the crossing of a signal line to distinguish between bullish and bearish momentum. This information is very important because a stock cannot stage an advance or a decline without the applicable momentum influencing it.

I have highlighted the two instances where a MACD cross was generated.

In September 2015, a bearish MACD cross was generated. It indicated that bearish momentum was influencing the price action in Valeant stock and, therefore, the stock was geared toward lower prices. This stock proceeded to fall from $177.09 to $8.31, losing 95.4% while this indicator was in bearish alignment, illustrating the significance of this indicator.

That is why, when a bullish cross was finally generated in May of this year, I knew that a bottom was being formed because bullish momentum was once again paving the road toward higher prices.

The next indication suggesting that a bottom was being put into place was generated in July, and it is illustrated on the following VRX stock chart.

Valeant price chart Chart courtesy of StockCharts.com

The indication highlighted on this Valeant stock chart is a golden cross. This indication was created in July when the faster 50-day moving average, highlighted in blue, crossed above the slower 200-day moving average, highlighted in red.

A golden cross is a signal that indicates a bull market is in development. What makes this signal special is that this is the first time that the moving averages have been in bullish alignment since October 2015. Now that a golden cross has been created, this is not an indication to be taken lightly.

The MACD indicator and the golden cross are enough to suggest that higher VRX stock prices are likely to prevail, but there was a line in the sand that needed to be crossed in order to confirm it. This line in the sand is highlighted on following stock chart.

vrx stock chart Chart courtesy of StockCharts.com

The level of resistance, which resided at $18.50, was my line in the sand, and it has been the subject of many of my publications regarding Valeant Pharmaceuticals.

Ever since Valeant fell below this price point in November 2016, every attempt to move above it has been thwarted. I have stated in numerous publications that, in order to confirm the notion that VRX stock has finally bottomed, the stock price needs to break above this level of price resistance.

On December 8, Valeant shares finally broke above resistance. The combination of this feat and the signals that came before it is enough to suggest that a bottom has finally been put in and, therefore, the stock price is free to appreciate.

Analyst Take:

I am bullish on Valeant stock because the indications on the company’s stock chart are suggesting that the bear market that pillaged the share price has finally run its course, which means that VRX stock can now embark on a move toward higher prices.