Saturday, July 21, 2007

Wyeth (WYE): Strong stock in a weak sector

I was just talking to a friend of mine who works at Wyeth. I told him about the blog so I thought it would be appropriate to take a look at Wyeth's chart.

I'll start out with the weekly. As a reminder, my goal is to take stocks with strong fundamentals and use technical analysis to find low-risk entry points. As it can be seen, WYE has been in an uptrend channel since late 2004, so clearly the fundamentals are there. Right now it is hugging the upper trend line, which is not the best place to enter a long position. If I was looking to buy WYE, I would wait for a pullback to the lower trend line or wait until the price consolidated long enough for the lower trend line to catch up to the price. Right now, $52 looks like a nice price. I think it is important to point out that WYE is performing very well, especially since the pharma and biotech sectors seem to be in the dog house.

Let's now take a look at the daily chart for WYE. Sometimes the best entry points correspond to times of extreme market weakness and it is nice to identify strong support ahead of time so one is poised and ready to pull the trigger. WYE has such an area of support around $50.50. If for some reason it pulled back sharply to the breakout area and volume dried up, I would be all over WYE.

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