Teva Pharmaceutical Industries Ltd (ADR) TEVA 0.23%shareholders are jumping for joy on Monday after the market gave new CEO Kare Schultz a warm welcome in the form of a 21 percent gain for Teva stock. However, once the euphoria of a new CEO wears off, traders should be looking for the reality of Teva’s situation to set back in.
Despite Monday’s big gain, Teva shares are still trading well below where they were in early August, when a guidance and dividend cut blindsided the market and sent the stock tumbling. The stock plunged from a July high of $33.67 to as low as $15.22 last week.
Analysts piled on with eight downgrades following the August guidance cut. On Monday, Teva shareholders enjoyed a rare upgrade from Wall Street when BTIG raised its rating to Buy on news of its new CEO.
Tread Carefully
While a change of leadership can certainly be grounds for a shift in a stock’s outlook, the market’s positive initial reaction isn’t always indicative of a longer-term trend change. Both General Electric Company GE 0.48% and Ford Motor Company F 1.02% recently replaced CEOs after extended periods of underperformance. Both appointments were followed by an initial pop in the stock before the stocks subsequently drifted back to new lows in the weeks that followed.
For Teva traders, the first indication of whether or not the market is taking Teva’s new CEO seriously will be Monday’s closing price.
If the stock pares a significant portion of its gains into the close, it will be…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
