Forest Labs has been mentioned in this blog, but quite some time ago. I had completely forgotten about it. Here is the chart of March 9, 2009;

If you go to the blog you will see that this stock was recommended as a buy, for the rather obvious reason that the A-B-C looked pretty nice and symmetric.Here is what happens next;

You would have doubled your money, and even if you sell now you are still up 50%. So what is next. The big A-B-C says that the $18 low should be the low for a long time, yet the small A-B-C says that the $40 high is the top of a counter-trend rally and consequently we should go to new lows, particularly since there is already overlap and the 3-waves cannot, anymore, morph  into a 5-wave sequence. When two outlooks are not reconcilable obviously one must be wrong. So when in doubt get out, take the 50% and move on.

Still has a way to go!

Pharmaceuticals are looking a little brighter as M&A activity seems to be focused on this nick of the woods. We had WYE and now SGP and perhaps more to come. Obama is lifting the ban on stem cell research and so on, all good stuff but the reality is that all the pharma companies are in trouble due to patent expiries, lack of pipeline products etc. etc. The beneficiaries are, of course, the generic producers. The product has already been “sold”, it’s efficacity is not in doubt, and governments love the lower prices. Forest Labs is one of the generics.

Here is the chart since 1982.  The drop from the high near $80 is an a-b-c, potentially a completed correction. Furthermore with a low at $18 it certainly has done the obligatory 62% and then some. The P/E is around 6 to 7. As these are big moves it pays to look at this a-b-c on a log-scale chart.

Note that c is already larger than a so this stock could turn at any moment! Looking at the chart in detail;

Judging by the RSI and OBV one more low below the $18.50 level is entirely possible but not necessary. To see what can happen look at CI Cigna some 6 years ago. This is best traded as an option IMO.