Technical prediction can work

Here is the news: Valeant Pharmaceuticals reported Tuesday that second-quarter sales slipped 11 percent year-over-year to $2.4 billion, coming in below analyst estimates of $2.5 billion. Meanwhile, its quarterly loss widened to $302 million, from a loss of $53 million in the same period of 2015. Still, Valeant shares gained as much as nearly 25 percent following the bad earnings report.  You may recall, I made a technical call for VRX 2 months ago when it fell like a stone following a disastrous earnings report.  I saw its technical strength at that time and my prediction at that time was that VRX could go up towards $29.  But my call did not work out immediately though. Actually VRX continued to slide down a few points from my call. Then all the sudden it jumped 25% higher following another big miss in earnings, touching $28 which is close enough to my target. Anyone having the gut to buy and hold VRX 2 months ago should be rewarded nicely. By the way, I did noticed that VRX plummeted again over 10% following the news of being probed for a potential fraud. Just a few words about this. First of all, as I said I had no intention whatsoever to suggest for a long term investment for VRX and this was purely a short term trading call. I hope anyone who held VRX till this earning call has already got out with profits. But even if not, this new damaging black swan that cannot be predicted by any technical analysis is not the end of VRX. Actually VRX is still technically bullish for the near future and this latest plunge may turn out to be another platform for its next leg up. This may likely be another short-term overreaction for VRX. Again, I’m just talking about this purely from the technical perspective. By no means, VRX is a good long-term investment!

 

Here is another example of my technical call recently. Also 2 months ago, Ralph Lauren (RL) fell 10% to $85 following disappointed earnings. But again I saw a technical strength with it. Here is what I said:  Anyone who dared to buy it below $90 should be really happy as we are talking about over 5% immediate gain over just a few days. But I think it has more upside potential moving forward. Today is another demonstration why RL is quite bullish technically: when the overall market is under heavy selling with nearly a 20% jump of the volatility, not much downside move for RL today. I will hold RL as long as possible until I see a technical bearish sign showing up. For now, I only see a strong upward trend for it. RL did move up after my call to around $100 but then came down again towards $90 thereafter. Last Wed, RL finally exercised its technical power and sprung 10% higher following a good earnings report. Now it has overcome its 6 months resistance around $100 and has definitely broken out from its side way trading range. This is again very bullish technically and I won’t be surprised to see RL marching towards $120 in months ahead.

 

In a nutshell, the technical setup for a stock is an integrated summary of the stock status based on the combination of fundamental and emotional factors. It often has a good predictive value if no unexpected surprise arises, although it may not work out immediately. I recently made another technical call for Gilead. It hasn’t worked out yet but mark my words: I’m very confident that GILD will sooner or later follow its technical strength to move a lot higher from here.