After Allergan (AGN) reported earnings on February 2nd, the stock saw a high volume sell-off from what was a promising technical setup. Prior to the earnings report, Allergan has been a notable outperformer for quite some time. As an example, the stock was hitting all-time highs back in October 2011, while many issues where simply trying to stem the tide in the wake of the S&P 500 hitting yearly lows.
Since “the event” on February 2nd, Allergan has recovered nicely. I often note that it is not the actual news, data, or earnings that matter so much as how the market reacts. To be even more precise, the reaction by the market to the initial reaction can often be even more significant. Here, Allergan saw an initial bounce back up to the key $89/$90 level, and has since based out for a few days. This level is the last line in the sand in terms of resistance, as the stock is flirting with all-time highs yet again.
After the initial sharp move to $89 back in October, AGN has taken the time to adequately come to terms at this level to contend for a major breakout. The fact that Allergan is knocking on the door even after a vicious earnings sell-off should tell you how strong the stock truly is.
2 Responses to Reacting to the Reaction of a Bad Event
Actually they beat.
Or perhaps how strong the overall market truly is in lifting most boats…
However, I do agree the stock (and the company) is strong, and actually the earnings seemed good so the initial reaction did not seem warranted. Now investors with their response have confirmed this suspicion. Glad you brought it up because I hadn’t kept it on watch but was curious about that big drop when it happened.