My Thoughts On The Pummeling TEVA Has Taken

Some have asked for my latest thoughts on TEVA in light of the latest bad news. So today I want to give you my latest thoughts. You'll find that it doesn't focus on today's news because news is fickle. Today it can be bad news, tomorrow could be good news. So I don't invest or not invest on news.

Additionally, when the news is the worst is when the values are the greatest, typically. And when the news is the best are when values can almost never be found. So those that think, "Good news=buy the stock or bad news=sell the stock" will almost always end up with a sub-par return long-term.

Instead, one must be a contrarian...because if you wait for the news to turn around and become favorable once again, you'll miss out of a huge chunk of the next uptrend. Why? Uptrends are birthed on bad news and the sentiment and news typically doesn't turn around to the upside until the trend for the stock has been upward for a while. You'll find that by that time, the value is gone and the stock is at best fairly valued and many times, already overvalued.

So those are some reasons why I'm not news motivated. Additionally, "news" isn't quantifiable. Fundamentals don't change quickly and they are measurable. Sentiment is measurable and technicals on charts are measurable. So today, I want to focus on the technicals.

For instance, notice that the stock has dropped from $68 in 2015 down to the $15-$16 range today. $68 was likely overly optimistic on the stock and $16ish is likely overly pessimistic on the stock, long-term. Could it drop some more near-term? Sure. But here are some things worth noting.

The stock price today is the same as the stock price 14 years ago. So is Teva so bad that it's worth erasing 14 years of stock gains? That's likely an overreaction.

Also notice that the a-b-c downtrend is likely near its end which is on the largest selling volume in its history. Since that's most likely the peak in negative sentiment, then the stock has most likely been misjudged and therefore mispriced.

I'm also noticing the MACD's downtrend being broken and the RSI firming up a bit, both of which are bullish signs. In addition to this, today's "bad news" so far did not take the stock down to new 52-week lows and the selling volume wasn't nearly as high as its peak. While it's too early to say for sure...this likely shows that many of those who were going to sell have already done so.

Additionally, one of the biggest buying spikes in TEVA's history has also recently occurred. And it's on such a large scale that we know it's large institutions that are creating that massive buying volume.

Finally, look at how far the price of the stock is stretched below its red, 200-week moving average. It's further below this moving average than at any time in its publicly traded history. This is just one more sign that investors have likely overly punished the stock.

You see, you can count on investors to be gripped by fear near bottoms and so they irrationally punish the stock, just like investors become gripped by greed near tops and overprice the stock.

There's no doubt that Teva carries too much debt and doesn't carry nearly enough cash for its size. Therefore, it's not worth averaging down on or initially buying. But for those who currently own it, it's worth holding because of its huge market cap, decent earnings last year (even in a tough time for the company) and its super-cheap price-to-earnings ratio.

These are my current observations on Teva. I hope you've found them to be helpful to you.

God bless!

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