Even though I have owned Valeant Pharmaceuticals (VRX) through its horrendous downtrend from the $25 price level, I have been reluctant to discuss it much as I bought into the downtrend too early. (Take note 4 Stock Stinkers – don’t rush into downtrends. Even when they rebound, they usually re-test the bottom).

Valeant Pharmaceuticals (VRX)

Valeant Pharmaceuticals (VRX) is showing signs of a rebound after an earnings sell-off with little selling volume. This little selling volume appears to have completed a Wave C which then completed an Elliott Wave 8 Wave Cycle.

Waves 1-5 of the Bullish Impulse wave pattern formed from its low of $8.31 to its high of $18.25. Then a Zig-Zag wave pattern formed from the high of $18.25 to the pullback low of $13.66. That is the 8 wave pattern I think developed from an Elliott Wave perspective. If this is the correct Elliott wave pattern, then the $13.66 should be the bottom of VRX’s earnings pullback.

This is a 1 year daily chart that reflects some strong buying support around the $14 price level. VRX’s share price closed today at $14.15.

This completed 8 wave cycle from an Elliott Wave perspective I think is really Waves 1 & 2 in a larger Bullish Impulse wave pattern. Here is an illustration of the pattern to refresh your memory.

 

Upside Price Targets

If the green Fibonacci Extension Tool that I overlaid on the above chart represents a possible Wave 1 and Wave 2 in a larger Bullish Impulse wave pattern, then the $14 price level should act as very strong support. With any sort of bullish news VRX should be a $20 stock quickly.

At a minimum, the initial price target for going long on an upside trade would be towards the 100% Target Line. The 100% Target Line has a $23.59 price objective.

While the 100% Target Line is a highly probable price objective, the 161.8% Target Line represents the Golden Ratio for the current uptrend. It also represents, in my opinion, the most likely price target area for Wave 3 in my larger-scale Bullish Impulse wave pattern.

If VRX’s share price is going to start a Wave 3, look for a plethora of positive news stories to emerge over the next couple weeks. Maybe the sale of some assets…..maybe a new drug approval…..whatever the case, I do anticipate positive news stories which help  a Wave 3 to reach its uptrends Golden Ratio.

Picking up some shares in the $14 – $14.50 range appears to be a possible lucrative short-term trading strategy. The $13.66 price level may be the closest that VRX get to the $12.79 – $12.99 support area from the Rising Window candlestick pattern that developed on June 19. A 2nd scale-in purchase can be made at the Rising Window support area if the current $14 support fails.

Good luck trading!

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