Here’s a tale of two V’s. Check out Valeant and Vertex. (October 13, 2017)
VRX VRTX VRX VRTX
Valeant Pharmaceuticals ( NYSE:VRX ); this is like the tales of two Vs. The reason is because both of these stocks are in volatility squeezes. Valeant Pharmaceuticals ( NYSE:VRX ) was here. Oh my gosh! I am looking at this, sideways trading, low volume. This is the perfect textbook volatility squeeze. There are some issues as far as the way the 50-day moving average is, this and that and the other thing, I can pick apart. But the bottom line is, looking for a breakout above 14.80, this is what we want to do.
That trade is OVER now. You don’t get a breakout here. It is going to do one or the other, that is a volatility squeeze. They are conditional they are not directional. We had the conditions here, this is a breakdown now. So now what we are looking for in Valeant ( NYSE:VRX ) is like nothing. Let somebody else buy this stock. This is way too much resistance up here.
The only way NOW that I would buy this stock is if the stock does what I initially thought that it MIGHT do. And that is, break out to the upside. Don’t buy it here anticipating that it is going to do that. If it does it, it does it, fine, you will have plenty of time to make that $3.00 to $4.00. If the stock does move up here you could make 20 percent on the stock. I mean, $15.00, it breaks out, you think it is not going to go to $18.00? It absolutely would go to $18.00 if it broke out here. But now, this trade is done!
Now, Vertex ( NASDAQ:VRTX ), a similar dynamic here. A very similar dynamic, this hasn’t made a move yet. Would I buy Vertex ( NASDAQ:VRTX )? Absolutely not! But if the stock starts trading above 156.25, that is where I am setting the alert. If the stock breaks out above this 156.25 and stays above the upper Bollinger Band then this is going to do what Valeant Pharmaceuticals ( NYSE:VRX ) might have done but didn’t do it.
So, look at these two squeezes and don’t anticipate what is going to happen. The cool thing about these volatility squeezes is that when they set up right you are not going to make that much more money by anticipating them. Because the move is so big, so dramatic there is plenty of money to be made. But by anticipating them what you are doing is, you are putting yourself at risk to have a lower batting average. That is really what it gets down to. Why take a bunch of losses trying to anticipate a volatility squeeze when you can have a much higher batting average, a greater probability of profit if you just wait for the stock to break out? If you wait for it to say, “Yes, buy me.”
So, check out Vertex ( NASDAQ:VRTX ). Valeant ( NYSE:VRX ), I wouldn’t touch the thing, certainly wouldn’t short it.
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