When poring over charts this week I wanted to find a stock with low risk, a safe dividend and a potential reversal brewing. With every search I kept coming back to this one - Pfizer. It's a stock that has driven investors crazy over the years. It had a magical run during Covid but has given back all those gains. However, from a risk/reward perspective the time feels right to revisit the trade. You can see that full round trip in price in the 10-year weekly chart below. Large pharma is mounting a comeback, and Pfizer seems poised to partake in the action. Shares appear to have found a bottom and are on the verge of a significant reversal.
The setup
We are keeping it very simple this week. Let's review our reversal checklist:
- Price has broken above its downtrend on a weekly basis going back to its 2024 peak
- Near-term trend is now up with a consistent series of higher lows for a year
- Price is above a rising 50-week moving average
- Momentum indicator in its RSI trending higher and not overbought
When we examine price action on a daily basis, we see a clearer picture of this potential turnaround. In this one-year chart above we have a few technical factors in play demonstrating a good risk/reward scenario at these levels.
- Support to the downside is clearly defined around the rising 50-day moving average
- Shares are forming an ascending triangle with a $30.50 upside target on a breakout
- A bullish golden cross has formed
The trade
Buy shares on recent weakness while Pfizer remains in this current uptrend. On a breakout above $27.50, expect a rally to $30 as shares claw back to their 200-week moving average at $32. The risk/reward isn't optimal over the near term. If price falls below $25 one may want to step away and revisit another time. However, given the global backdrop and recent volatility, plus the stock's 6.4% dividend yield, this trade could be one that helps you sleep better at night. The sector, especially large pharma, remains healthy and tends to act as a safe haven during market pullbacks. Other stocks within the sector like Johnson & Johnson , Merck and Eli Lilly continue to act well and now Pfizer, from a technical perspective, looks poised to join the party.