Helping Self-Directed Investors Succeed Blog - Will This Big Phama Stock Break Out

Will The Big Pharma Stock Break Out as of July 13th, 2018

July 13th, 2018

US equity investors climbed a wall of uncertainty this week on the impact of the tariff war escalation - with the US announcing another 10% tariff on $200B of products imported from China. There was no tit-for-tat move from China on this occasion. The tech heavy QQQ - Nasdaq 100 Tracking ETF broke above a mini 4-week consolidation. The DIA - Dow 30 ETF turned positive for the year and the broadest S&P 500 ETF - SPY continued its ascent to gain 4.7% for the year.

The last couple weeks have been important for regular Pharma and Bio Pharma large cap names. It all started with Biogen - BIIB announcing an important breakthrough in Alzheimer's Disease treatment. This week Pfizer - PFE reported positive movement - receiving FDA approval for a drug that treats a specific form of Prostate Cancer. The reaction to Biogen's move was extremely positive last week. Equity investors didn't appear to show the same amount of enthusiasm for this announcement from Pfizer.

PFE's price closed higher above a 9-week consolidation this week but the price rise did not quite seem like a classic breakout on higher volume. The stock logged a 52-week high of $39.43 in late January 2018 and since then it has been correcting and consolidating. This week's close at $37.53, we believe is a positive move for this stock considering the overall sentiment which seems to be not so downbeat for Pharma.

PFE is expected to announce earnings for 2nd quarter 2018 on 7/31 - roughly in two weeks. Expectations are for a respectable jump in earnings as compared to prior periods. The S&P Pharma Sector SPDR - XPH ETF is also trying to push itself higher out of a multi-month consolidation which does bode well for prospects for the sector as a whole. Considering all this, we believe PFE may have some more room to run especially if no negative news flow hits between now and earnings time.

Self-directed investors will want to perform more research on this stock to see how appropriate this is for their own portfolios.

Good Luck and Happy Investing!

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