A little over one week ago, we featured Philip Morris International Inc (NYSE: PM), one of the market’s most notorious “vice stocks” that in 2018, had a terrible year. Share prices fell over 38% in what ended up being a major correction, and since then, PM has been trying to recover.
On July 3rd, we found a promising setup to go long on PM after a higher low was set in late June. Our trigger point of $80.30 was taken out, and since then, share prices have risen.
However, they haven’t quite “exploded”. At least, not yet. A burst upwards still seems likely, but until it happens, PM bulls still have a chance to get long if they haven’t done so already.
In the weekly candlestick chart above, you can see that share prices are up since we looked at PM last. More importantly, the higher low from a few weeks ago has held and stochastics have yet to exceed 50 – a good sign that PM has plenty of upwards potential left.
The upwards Bollinger Band (BB) is still a ways off, giving PM plenty of room to run, and we’re even about to cross north of the 50-week simple moving average (SMA) – something that many traders would see as a sign to buy.
In this case, setting a new trade trigger at $83.00 might make sense. Especially since that price lies just above the 50-SMA, a “critical juncture” according to some analysts.
Based on what we’ve seen over the last year, PM appears as though its destined to bounce between the upper and lower BBs in the future, creating consecutive setups to go both long AND short during the second half of 2019.
In fact, Wall Street’s starting to like the stock as well, albeit for different reasons than listed above. Bernstein analyst Callum Elliott confirmed an “outperform rating” last Thursday, giving PM a price target of $99 – $18 above where PM sits currently.
He’s excited about the company’s new iQOS device (pronounced EYE-kose), which offers smokers a healthier way to consume tobacco (relatively speaking). It’s a direct competitor to vaping devices, without actually being classified as an electronic cigarette – a product category that’s closely watched by regulators.
In fact, the FDA outright approved the iQOS back in April of this year, and Elliott thinks that recently released iQOS sales data is worth getting excited about. In particular, he’s encouraged by the fact that it sold out in at least one key market.
“We estimate that Philip Morris had almost no iQOS stock in the system at end of the first quarter (in Russia), which may necessitate significant stock build through the rest of the year.”
As a technical analyst, I try not to read into this kind of information too much. Especially if it’s coming from a fundamentally-minded analyst.
For our purposes, PM’s price action on the chart is all the evidence we need. If investors are impressed by the company’s new product, their enthusiasm will be reflected in the share price. Then, and only then, should a technical analyst consider entering a trade.
Not because they think an iQOS sell-out in Russia is an auspicious sign. It might be, but until the stock rises, we don’t really know what the short-term (or even long-term) effects could be. For that reason, I’ve found that relying on the charts, not conjecture from report-scouring analysts, offers a more consistent path to finding winning trades.