Is Valeant Ready To Pop, Or Drop?

It’s probably not a surprise that the market has been going through a rough patch. The news wire is full of negative headlines.

• Greece is finally defaulting.
• China’s stock market is crashing non-stop.
• The Fed may or may not be raising rates this year.

All the while, the U.S. stock market is starting to show cracks to go with those headlines. The Dow Jones Industrial Average has been down around 300 points twice over the last seven trading days.

Individual stocks are breaking down. Others may not have broken down just yet, but are starting to show signs of doing so.

On the other hand, there are the few bright spots that are holding their ground relatively well. One such biotech stock showing a bit of strength is Valeant.

The company: Valeant Pharmaceuticals International, Inc.

Ticker Symbol: VRX

Sector: Healthcare

Industry: Drug Delivery

Valeant Pharmaceuticals International, Inc. develops, manufactures, and markets pharmaceuticals, over-the-counter products, and medical devices worldwide.

Related Link: 5 Biotech Stocks On Deck With The FDA

The company offers Solodyn to treat red and pus-filled pimples of acne in patients, as well as Ziana, Acanya, Atralin, Retin- A Micro, and ONEXTON gel; Wellbutrin XL for major depressive disorder in adults; Arestin, a subgingival sustained-release antibiotic and PROVENGE for the treatment of prostate cancer.

Review the one-year chart of Valeant with the added notations:

Valeant has been heading higher all year. From the stock’s August 2014 low near $105, Valeant has rallied all the way up to a May 2015 high of over $245.

During the bulk of that rise, Valeant has held a trendline of support that currently sits near $210. In addition, the stock has formed a recent level of support at $220.

The question now becomes whether Valeant will hold the $220 support, and break up through the stock’s short-term, trendline resistance, or break the $220 support and fall to the trendline.

Watching these levels can help traders and investors pick and choose the optimal times to enter or exit trades on the stock.

Valeant last closed at $224.46.

No matter what your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key.