When British regulators approved the use of AstraZeneca's (NASDAQ 🙂 COVID-19 vaccine on December 30 and started administering the vaccine last Monday – becoming the first country in the world to do so – why are the shares of the London-based pharmaceutical giant on the way down?
Stocks have risen record after record because of the vaccines, so shouldn't a vaccine manufacturer be closed as well? Yesterday we stated in a post on Pfizer}} that the current decline in pharmaceutical stocks is due to profit taking.
However, it should be noted that while we are optimistic about Pfizer (NYSE 🙂 and Moderna (NASDAQ :), maker of the other vaccine currently distributed worldwide, we are bearish about AstraZeneca, but not because of the potential of the vaccine.
Following the Dec. 16 announcement that it was purchasing Alexion Pharmaceuticals (NASDAQ: {{13810 | ALXN) in a $ 39 billion cash and stock deal, AZN's shares began to decline. The stock fell 7% from its December 8 closing price of $ 54.72.
At the same time, Axion enjoyed an increasing gap and a 29% profit. It's clear what investors think of the deal and which company they think was the biggest beneficiary of the transaction, which raised eyebrows as the two drug manufacturers operate in very different spheres. While AstraZeneca deals with common diseases, Alexion produces therapies for rare diseases.
Yet AstraZeneca is down just 12.5% ??from the December 8 close, while Pfizer is down 13.4% and Moderna down 31.6% – and the last two companies currently have no bad deals on their books . So why are we bearish on AZN?
Yesterday the stock formed a shooting star at the very top of a bearish flag, near the top of a falling channel, after the 50 DMA crossed below 200 DMA, causing a death cross.
AZN Weekly
Chart powered by TradingView
If we look a little longer, we see that this threefold resistance of the shooting star, flag top and falling channel top – after the death cross – occurs at exactly the same level of the neckline of a large H&S top since May 2018, with the added resistance of the 50-week MA.
The implied target of the H&S Summit is $ 14, meeting the long-term uptrend since the 2016 low. While the 50 WMA resists, the 100 WMA is support and the 200 WMA supports the long-term uptrend.
Finally, confirming the bearish aspect, the weekly MACD and RSI follow clear bearish trajectories. complete, with a downward breakout followed by a return movement to confirm validity of the pattern.
Moderate traders are likely to wait for the same completion of the flag and return movement, but for closer access and not necessarily confirmation.
Aggressive traders could go short at will, provided they plan their entry and exit points, based on the supports and resistances, which provide a favorable risk / reward ratio.
Here's an example:
Trade Sample
Admission: $ 51
Stop Loss: $ 52
Risk: $ 1
Target: $ 48 – December lowest
Reward: $ 3
Risk: Reward Ratio: 1: 3
