Sand Spring Advisors LLC
April 6, 2002
by, Barclay T. Leib
There is no finer pharmaceutical company around than Pfizer with its well-developed and robust product line. Led in part by the success of Viagra, Pfizer has been a market darling for the past 5 years -- a Blue Chip haven of strength amidst capital destruction from other lesser tech and biotech companies.
But just as the chart below of Ford Motor Company succeeded in making a huge topping formation that has now led us to forecast that Ford will eventually reach $12.45 a share, so too do we worry a bit about the current chart pattern of Pfizer.
In many ways all Pfizer's recent churning within a range could just represent a normal continuation pattern to the upside. But last Friday, partly on the back of reduced earnings estimates by pharma brethren Bristol-Myers, PFE moved lower, and is now standing on the brink of a downside breakout.
We would not go short PFE, but just as with our prior commentary on Johnson & Johnson where we pointed to Johnson & Johnson reaching Fibonacci resistance near $64, we certainly would advise taking profits or buying zero-cost option collars on core PFE investment positions at this time. There is at least a strong risk at present that PFE may need to re-visit the mid-20's before its long-term growth prospects reassert themselves.
As a whole, the pharmaceutical sector has been a wonderful safe-haven for capital throughout the recent bear market. But with JNJ on Fib resistance and PFE starting to roll over to the downside, is it ready to crack now? The fickle finger of this market's sector rotation certainly points in that direction.
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