WWM - Analytics

    WWM

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    Today’s Trading Edge: Allergan shares unable to hold rally after FDA approval of Teflaro and Icahn discloses large stake

    WWM_AGN_MAY_31_2016.jpg

    Allergan plc (AGN) shares initially rallied following the FDA's first antibiotic approval for pediatric patients in more than a decade.  The U.S. Food and Drug Administration (FDA) has approved the company's supplemental New Drug Application for TEFLARO (ceftaroline fosamil), granting new indications for pediatric patients 2 months of age to less than 18 years of age with acute bacterial skin and skin structure infections, including infections caused by methicillin-resistant Staphylococcus aureus (MRSA), and community-acquired bacterial pneumonia caused by Streptococcus pneumoniae and other designated susceptible bacteria.

    Allergan shares also benefited after Carl Icahn announced he acquired a large stake in the company.  Icahn reiterated his support for CEO Brent Saunders.  Specific terms of the size of the stake were not yet disclosed.   

    Price action on the AGN 240-minute chart shows that the recent rally may have formed a bearish butterfly pattern.  Point D is targeted with the 161.8% Fibonacci expansion level of both the X to A move and the B to C leg.  If valid, we could see a bearish reversal target the $230.00 zone.  Major support will come from the $220 handle.  

    If we see a return of the bullish rebound, further upside may target the $260 level.  Longer-term upside targets include the $279 level. 

    The Trade: Buy AGN at $230, with a stop loss at $225 and a take profit at $245.  The Risk/Reward Ratio is 1:3


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