Name: Taro Pharmaceutical Industries (Nasdaq: TARO)
Last price: $27.47, as of June 5
Support to watch: $25/27
Resistance to watch: $30
Chart courtesy of Stockcharts.com
Last week, we wrote about Teva (Nasdaq: TEVA) and the strong resistance encountered by the share at $67.50. This resistance has now proven itself, but as of now, support at $65 is not allowing the share to fall. This week we will look at Taro, another pharmaceutical company. It has recently been compared with Teva in terms of its fundamentals. Taro, which rose continuously last year, is now on a downward trend, and may continue falling.
Four technical points constitute the key to analyzing the share’s future:
- Strong resistance at $30.
- An upward breakthrough of the falling trend line at about $27.
- Possible support at $27.
- Possible support at $25.
In tandem, these points create the following picture:
A move above $27 has created a chance of further rises up to the strong resistance point at $30. If Taro manages to rise above $30 and finds support above this level, further substantial rises can be expected.
The current resistance at $30 creates heavy downward pressure, which is liable to continue in the short term and put the $25 and $27 support levels to the test. Support above $27 and an upturn will constitute a very bullish signal, indicating a possible attempt at an upward breakthrough at $30. Support at $25 will also facilitate a renewed upward trend. A move below $25 will show the downward trend still holds; in this case, the share can be expected to fall further.
In the absence of other indications, the point of departure is that Taro will continue to fall. Many signs support the downward pressure. Buying the share will be considered at each of the points noted above: above $30, above $27, and above $25. Above $30, the price is high, but the chances of gains are good. Above $25, chances of gains are poorer, but the risk is lower, because of the lower purchase price and the proximity of a hedging sell order (below $25). Strong support can be expected at $25, at least in the short term.
The above recommendations were made by a person/s working in the investment industry, who may hold positions in securities mentioned in the column. This column should not be taken as advice to buy, sell or continue to hold any securities, and anyone acting on the advice of this column does so at his or her own risk.
This review was written before the opening of Thursday trading in New York.
Published by Globes [online] - www.globes.co.il - on June 6, 2002