After its reversal to the downside on July 19th, the Novartis AG stock (NYSE: NVS) had drifted lower and fell below its 200-day EMA. After declining for a few months and trading below its medium-term downside resistance taken from the high of that reversal day, the price started rising again and yesterday it briefly broke above that line. That said, NVS still closed the trading session below the downside line, but given that the upside momentum started picking up, there is a chance we may see another outburst higher. However, in order to get comfortable with higher areas, not only that we need to see a break of the above-mentioned downside line, but also a daily close above the 87.77 barrier. We will take a neutral stance for now and wait for a clear break of one of our levels first, before examining a further directional move.
If eventually we get a break of that downside line and the price closes the day above the 87.77 barrier, marked by the high of September 20th, this would confirm a forthcoming higher high and would place the stock above the 200-day EMA. Such a move might attract more buyers into the game and NVS could then be lifted to the 89.55 hurdle, which is the high of September 12th. If the buying doesn’t stop there, the next stop for the price might be the 90.96 level, marked by the high of August 30th. This is where the stock could stall temporarily.
Our oscillators, the RSI and the MACD, are somewhat in support of the above-discussed scenario. The RSI had showed us signs of bottoming, it travelled fractionally above 50 and is pointing a bit to the upside. The MACD has also started pointing a bit to the upside and has moved above its trigger line. That said, the indicator still remains in the negative territory. So, on one hand, the RSI is suggesting that there might be some upside coming up, but the negative MACD is one of the reasons why we will stay neutral for now.
Alternatively, if the stock continues to trade below the aforementioned downside line and the price slides below the 85.58 zone, marked by the low of this week, this could open the door for a further moves south. We might then target the 83.94 support area, which is currently the lowest point of October. Initially, NVS may get a hold-up around there, or even correct back up a bit. That said, if there are still no new buying seen in that price range, this could lead to a few investors liquidating some of their current positions. Such a move may force the stock to slide below the 83.94 obstacle and target the 81.64 level, marked by the low of May 20th.
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