Sean, I hate to ask... but with another 20% drop on TEVA, I have to understand the technicals!…

Sean, I hate to ask... but with another 20% drop on TEVA, I have to understand the technicals! What's happening here In ref to Elliot wave?

It's towards the end of a wave C on its weekly chart. The selling volume is beginning to lighten up on the weekly. Fundamentally, its strong enough to hold but I wouldn't add to it, necessarily. The good: It's an $11 billion company with a forward P/E of 3. And it earned $7.42 billion last year. The not so good: They have $599 million in cash and $35 billion in debt. So...once the price begins to bounce back, it will help the market-cap to debt ratio but I don't like it that they have quite a bit of debt now and they don't have as much cash on their books as I'd like to see.


So today's stock price is the same stock price as it was 15 years ago. I'd call that an overreaction. We can also see how overdone it is by how far the price is stretched away from the 200-week moving average and, by far, the largest selling volume in the last 20 years (point of maximum pessimism).

It's back up 9% today. Very volatile near the end of a downtrend.

In an effort to recover, would you recommend averaging down to lower the break even point? I understand that fundamentally based on cash on hand and the amount of debt the company has accumulated puts it in a high risk category.

With my investing hat on, I'd say to only average down on the most fundamentally solid stocks. However, if you're willing to speculate with that entire position (including the averaged down money) and you're willing to lose all of the money in that position...then you can average down as long as you're fine with that scenario. It doesn't mean that scenario will happen. If I thought it would happen, we wouldn't be in it. But it could happen. It's why we average down on our strongest companies.


Thanks for the sound advice Sean.