AstraZeneca Plc: This Behemoth has been stuck in a Range for 1 Year

I am still on pharmaceutical companies and I have AstraZeneca Plc (ADR) (NYSE:AZN) in my scope today. AstraZeneca with its market capitalization of $87.29B is a United Kingdom-based global biopharmaceutical company. AstraZeneca is one of the top five pharmaceutical companies in the world. AstraZeneca discovers, develops and commercializes prescription medicines for six areas of healthcare: Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology, and Respiratory and Inflammation.

I last wrote about trading AZN options a little over a year ago, in an April 21, 2014 piece titled: “AstraZeneca Plc. Be Fearful When Others Are Greedy”.  In that post, discussed a $100B acquisition bid from Pfizer and I explored its diversified portfolio and cost-cutting initiatives. However, I wasn’t very impressed with the technicals of the stock and I recommended that you sell the AZN Oct 2014 62.500 put.

What is the AZN Chart Saying Now?

AZN Chart

The chart above shows how the shares of AstraZeneca have traded within the last one year. Without any analysis, it is obvious that the stock has been trading in a range over the last one year. I have highlighted the key support and resistance levels that the stock has maintained within that period.

When in a downtrend, the shares of AstraZeneca usually maintain a $65 support, a $66 support, and a $68 support.  If the support fails to hold at $68, the shares of AstraZeneca tend to fall to $66, and if the support doesn’t hold at $66, the shares of the company tends to fall below $65 to somewhere around the 52-week low of $64.26.

When in an uptrend, the shares of AstraZeneca tend to experience resistance at $70, $71 and $73. Hence, when the shares of AstraZeneca breakout above the $70 resistance point, they tend to climb towards $71 a trading price. When the stock breaks out above the $71 resistance point, it tends to soar toward a $73 trading price. When the stock breaks out above $73, it tends to move towards its 52-week high of $81.19.

AstraZeneca in the News

AstraZeneca had been in the news over the last couple of weeks, especially after the release of its first quarter (Q1 2015) results on April 24. Highlights of the first quarter results are presented below.

AstraZeneca reported first quarter profits of $1.08 per (ADS) share to mark a 3% Y-O-Y decline (at constant exchange rates). Nonetheless, the reported earnings were $0.01 higher than the consensus estimate of $1.07.

The company reported revenue of $6.1B to mark a 1% Y-O-Y increase and to beat the consensus estimate of $5.9B.

U.S revenues were down 14% Y-O-Y to $2.2B as the two best-selling drugs in the U.S. (Nexium and Crestor) are witnessing an increase in generic competition. Nexium sales were down 53% and Crestor sales were down 13%.

Sales in European markets weakened 5% Y-O-Y to $1.3B as the effect of generic competition continues to be felt in the sales of Crestor and Seroquel XR. Revenues in Japan also dropped by 2%.

How to Trade AZN Options

The crux of this post is that the shares of AstraZeneca have been trading in a range for the last one year and the first quarter results do not provide enough momentum that could trigger a breakout or breakdown in the stock. From the foregoing, it is obvious that AstraZeneca lacks the aura that warrants a bullish play; hence, I recommend bearish option trades. You may want to consider AZN Oct 2015 70.000 put (AZN151016P00070000) at an asking price of $4.20.

— Daily Option Alerts

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