Medicines Company (MDCO) — A cup and handle (almost!)
Discussed in this article: Medicines Company ( $MDCO )
I’m looking at that The Medicines Company ( NASDAQ:MDCO ), MDCO, this has been forming a really nice, pretty solid cup and handle pattern here. That you would say is the cup, this is the handle. We like to see the handle formed on lighter than average volume, which is what it’s been doing, and then today we’re seeing almost a breakout now. Heavier than average volume here, the stock came up just to test this last high, it hasn’t quite made it, so we don’t have a completed cup and handle pattern, all we have is the cup, and the handle, nothing else yet.
Now why did the stock do what it did today? The company announced that they’re acquiring a private antibiotic maker, Rempex Pharma, which I’ve never heard of because I don’t trade private companies. But, what this has done is, its shown the market, it’s shown traders, it’s shown you and me that this stock is still kind of in play so to speak. It hasn’t been a momentum stock; this is not a momentum stock. You look here, it’s been in a nice choppy uptrend that’s tested the patience of momentum traders, but this is a stock that’s been consolidating for the last couple of quarters, I mean for a long time.
So what I would suggest doing is look at the stock, is it something that you want to own? It’s pretty expensive as drug manufacturers go. The P/E, the trailing 12 months, is like 63.00, that’s a pretty hefty P/E. And the dividend; Oh, that’s right, they don’t pay one, so this is not exactly a cheap company. But as far as the chart, I would say if the stock pulls back, kind of gives you a gift to pull back closer to this 50-day moving average, that’s right here, if it gives you a gift and pulls back say to the here, or drifts sideways long enough to allow this to kind of catch up, that’s your best opportunity to buy this stock. But keep in mind, a breakout above this high here, that’s the completed handle in your cup and handle pattern.
So just watch how this stock trades, I would say a move above 38.50 or so, certainly 39.00, is going to clear the way for higher prices here. Again, the stock has been consolidating for quite a while.