Cipher Pharmaceuticals Inc. breaching support along a downtrend

Apr 1st, 2015 – Comment

The momentum indicators are not providing evidence that we might expect a trend reversal in the near term.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Dear Mr. Schizas,

Your thoughts about Cipher Pharmaceutical would be very much appreciated.

I am looking forward to reading your analysis about this company and once again thank you for your wonderful service.

Sincerely,

Johannes

 

Hey Johannes,

 

Thanks for the assignment and your kind words. They are both most welcome. This will be my first examination of the charts for Cipher Pharmaceuticals Inc. (CPH TSX). The company is focused on treatments for a variety of dermatological conditions and has three products in the market and four products in late stage development.

What is very evident from the onset is that the stock has created a lot of wealth since 2012 when it traded below $2.00. The run to the 52-week high of $19.53 in December of 2014 and the subsequent pull back in the first quarter of 2015 has many investors asking themselves how to manage these shares. In fact when I mentioned in my last post that I would be conducting an analysis of CPH on your behalf it prompted other stockholders to reach out seeking a second opinion.

The company has been racking revenue increases, higher profits, and has accumulated a cash horde of over $50 million. There is some speculation in the stream suggesting that CPH could use its cash for acquisitions or even become a takeover target itself. As nice as these factors are the stock is selling off which demands an investigation.

A reconnoiter of the charts will identify the patterns that will help you in your decisions.

 

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The three-year chart depicts the dominate pattern for 2015 which is the breach of support along the uptrend line, the 50-day moving average, and the 200-day moving average. The MACD and the RSI both generated sell signals in late December of 2014 as CPH met resistance at the 52-week high. The momentum indicators are not providing evidence that we might expect a trend reversal in the near term.

 

 

 

 

 

 

 

 

 

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The six-month chart highlights the break below support at $12.00 which calls into question if the stock will have to retest support at lower levels. CPH is going to have to provide investors with substantial motivation to step up and buy the stock. The company will report earnings for Q1 in May which might provide data to help turn this ship around.

I would advocate patience if you are considering buying and seriously reviewing your assumptions if you own the stock.

Next time I will inspect the charts for CanWell Building Materials Group Inc. (CWX TSX) on a request from Ross.

Make it a profitable day and happy capitalism!

 

 

Categories: Pharmaceuticals
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