Allergan is one of the S&P 500's worst-performing stocks, but one technical analyst contends it's worth buying.
The specialty pharmaceuticals company had seen a 40 percent decline from last July, but bounced back to $225 from a $200 low on Tuesday after beating first-quarter estimates. Given the rise, Evercore ISI technical analyst Rich Ross on Tuesday's "Trading Nation" gave three reasons for why there may be more than meets the eye at Allergan.
First, despite Allergan's downtrend since the beginning of this year, the company has actually kept above its 200-week moving average since 2009.
Second, Ross demonstrated that Allergan was actually on what he called a "measured move." This action saw the stock's highs sitting $70 above a head and shoulders line and its more recent lows settling at exactly the same amount of points below. Presumably, Allergan will once again rise $70 to around $270 based on the recent moves.
Finally, even with last week's lows, Allergan still managed to stay above its 200-week moving average. On Tuesday, the stock actually surged back up to $225 from almost $200 from last Friday, leaving Ross to believe that the company's long-term prospects looked attractive for buyers.
For those looking to buy Allergan, Ross cautions that investors should still make sure to have a clear stopping point in case the stock does dip further. He recommends a stopping point around the $191 to $195 mark, but otherwise remains optimistic about the specialty pharma company's long-term trends.
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