Pfizer Inc, is a multinational pharmaceutical and biotechnology corporation has been a relative underperformer within all of the SIA reports, and the SIA platform has effectively kept SIA practitioners and their clients away from this company. However, as we sit on a shortened market day due to the holiday in the United States, it is a good time to review this stock and reflect on how the checks and measures that keep advisors away from investments like Pfizer have worked. In addition, the Health Care industry is deeply unfavored in the SIA Market Industry rankings. The second reason for reviewing the chart of Pfizer is that it provides a textbook example of a Head and Shoulders technical pattern, which can be observed across various time frames, from day traders to long-term investors. The Head and Shoulders pattern is a popular reversal chart pattern used in technical analysis to signal a potential change in trend direction. A regular Head and Shoulders pattern forms after an uptrend, signaling a bearish reversal. It consists of three peaks: the left shoulder, the head (the highest peak), and the right shoulder (a smaller peak). The pattern is confirmed when the price breaks below the neckline, which connects the troughs between the peaks. The price target is often calculated by measuring the distance from the head to the neckline and projecting it downward after the breakout. The attached candlestick chart of Pfizer is scaled with monthly candles, so each candle represents one monthās worth of trading data. The long-term nature of this chart makes it all the more significant, as the full duration of this chart dates back as far as 2009. Note the first green arrow, indicating the solid uptrend that was in place for many years. This was followed by the formation of the left shoulder in 2019 (pre-COVID), before the head formed as Pfizerās share price surged upon the FDAās full approval of the Pfizer/BioNTech COVID-19 vaccine. As time passed, the shares retreated from their high and have been in a steady decline for the past several years. The price found support and a second shoulder formed just above the level outlined on the chart in red, indicated as the neckline. The only remaining factor in this chart is a breakdown past the neckline to confirm the reversal, which Head and Shoulders proponents argue could signal a further downtrend. Of course, this remains to be seen, but this is likely one of the most well-developed long-term Head and Shoulders formations many advisors will have ever witnessed in real time, should it materialize.
Armed with the SIA platform, we can analyze this technical setup from several different vectors. The main indicator, relative strength, provides more modern insights beyond just the visual head and shoulders pattern. When combined, these factors become even more significant. Letās dig into the facts. Above, you will find a matrix position chart for Pfizer that shows its rank from a relative strength perspective, demonstrating that the company's stock has been losing relative performance for many years. The point-and-figure (PNF) chart also overlays Pfizerās position in the SIA matrix using red, yellow, and green markers. This important tool allows advisors to quickly see that the stock is underperforming its peers (red), which, in this case, are all the stocks within the SIA S&P 100 Index report. However, after checking Pfizer's report logs, we see that it is buried deep in the unfavored zone across all reports in which it is a constituent on the SIA platform. Secondly, we can see from the PNF chart that the trend has already turned negative, which is concerning for the neckline support. For reference, we have marked the first support level at $23.91, with the final neckline support level visible at $21.65. Beyond this level, there is support at $18.85, but the chart shows a steep drop after that, with some support at $15, $12, and $10. To gain a better understanding of the Head and Shoulders on the point-and-figure chart, we have added the labels S, H, and N for visual clarity. One final data point that the SIA provides advisors is the near-term indicator SMAX, which ranks Pfizer against other asset classes. A 6-10 reading is considered positive, while a 0-5 reading is negative. With a SMAX score of 2 out of 10, Pfizer is ranked poorly in short-term performance compared to other asset classes, which is a concern as it sits on the neckline of a potential long-term Head and Shoulders reversal pattern, with very little support off the edge of the cliff.
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