Our Take on Pfizer
PFE Pfizer - $24.75 is down sharply this morning (-4.23 points for a drop of 14.59%) after stating that a new study found an increased risk of heart problems in patients who took its painkiller drug Celebrex:
The chart above shows that relative strength has been poor for quite some time now. Our Technical Rank is a non-linear modeling of relative strength. Since July, PFE has been unable to rise above our 2nd worst Tech Rank level of 20%. Moreover, its weakness has not attracted short sellers. The short ratio for PFE is a paltry 1.39, which leaves its Short Intensity Rank at 3% - almost at a 5-year low in short selling. If you are long, don't expect anything in the way of short covering to bail you out. PFE has been in our Type 4 - Long Squeeze screen for quite some time.
The chart below plots Pfizer as of the close yesterday:
PFE is a classic example of why we look at current year correlation to historical seasonal patterns. PFE has a very highly correlated seasonal cycle. Over 14 years, the seasonality (see purple line in the chart above) is generally a positive pattern. It is a valid pattern because of its cycle "r" of 0.65. This is a measure that splits the 14-year history in half, and correlates the seasonal pattern of the first half (thin red line) to the seasonal pattern of the second half (thicker red line.) A "r" statistic of 1 is a perfect match, so a reading of 0.65 is very strong, considering we are comparing 2 completed exogenous time periods. The key is how negative Pfizer's price action for 2004 is to its 14-year seasonal cycle. The 2004 seasonal cycle has a "r" of -0.89. A reading of -1 is a perfect inverse relationship, so -0.89 tells us that this year something is very different underway for PFE. It is not a good thing when a stock fails to improve despite a favorable seasonal pattern and rising market averages.
We are not saying that the above technical analysis predicted the pernicious outcome to the study that Pfizer released this morning. Whether it be a poor pipeline of drugs coming to market, or a shaky life cycle of drugs already on the market, there is serious distribution of major pharmaceuticals underway. Technical analysis tells you that distribution is occurring, not why. Sentiment analysis tells you that the "distribution" phase is not yet mature because of the dearth of short sellers. Interestingly, this is in contrast to biotechnology issues, which are ranked much more favorably in our work.
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