I am starting a new section for old-school investors who like to buy good quality companies at a lower price with the hope to sell them at a higher price in the future without getting too worried about stop losses. Having said that, every investment should have a stop loss exit plan to avoid big damage.
The stock is Pfizer [CMP: $34.85; and market cap: $194 billion]
Here’s why I like the stock?
- The stock is at a 200-day moving average [It usually acts as long term support and even tracked by institutions]
- It is very close to the horizontal support level of 33.
- The dividend yield at the current market price is 4.5%
- The market has not factored in Covid Vaccine sales yet.
Price Action Analysis of the stock:
Pfizer stock formed a bullish base at 33 and 200 day moving average between Sep 2020-Nov 2020, before taking off to $42 on news of Vaccine but then cooled off on disappointing earnings and the stock is back to 200 dma. What makes me a little optimistic – the stock is holding on to 200 day moving average which means smart quiet money is absorbing any little supply of the stock. All the stock needs is a small trigger to make a bullish move in the stock.
Return expectations: A rally back to $42 over the next 12 months can result in 25% returns, including dividends.
What will make me worried about the stock? – Any decline below $33 on a sustained basis. That’s when one should think about exiting because then it would mean there is something seriously wrong with the company.
If you love momentum, then this is not the stock for you.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers
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