Lannett (LCI) is one company I always keep an eye on. They are a well-run bio-pharm company and for the past year or two have been quite predictable in stock pattern investing.
LCI has been following the top and bottom lines of a wide, but rising, price channel. Currently LCI stock has bounced off of the lower support line of this channel and has calmly followed this line over the past couple weeks.
So, is it time to buy the stock? After all, it has been following this pattern for some time now bouncing between the lower support line and the top resistance line. With the price currently near the lower support of approximately $55 dollars, and the top level resistance of approximately $75 dollars, one is looking at a potential gain of 35% or more. That is impressive.
Fundamentally, LCI still looks strong.
- Triple digit average EPS growth for the past year.
- Three consecutive years of EPS growth.
- Over 50% average growth in sales over the past three years.
- Over 30% Return on Equity.
- Zero Debt to Equity Ratio.
But there are some weak spots.
- EPS growth, though still quite good, decelerated from last quarter.
- Fund ownership, though still positive, has decelerated as well.
- LCI is currently trading below its 50 day moving average.
Those last two points are key for me before jumping in with a full position with LCI. I would like to see it cross over the 50 day moving average on higher volume. That would be a sign of continued strength and institutional buying. But that is not to say it is not worth opening with a smaller amount now to see how it does. There is still some downside risk towards the 200 day moving average (approx. 10%) but I don’t see it failing that support level in the near future.
From a stock pattern perspective, anytime price / volume movement pushes the price over the 20 or 50 day moving average, that is a good sign.
Other positive crossing patterns include:
- The 50 day crossing over the 200 day moving average.
- The 20 day crossing over the 50 day moving average.
Which leads me to my next post, Bullish Cross Signals
Until next time . . .