Forest Laboratories, Inc. (NYSE: FRX)

Forest Laboratories, Inc. develops, manufactures, and sells branded forms of ethical drug products primarily in the United States and Europe. It principally offers Namenda for the treatment of moderate and severe Alzheimer’s disease; Bystolic for the treatment of hypertension; Savella for the management of fibromyalgia; Teflaro for the treatment of adults with skin and skin structure infections, and community-acquired bacterial pneumonia; Daliresp to reduce the risk of chronic obstructive pulmonary disease (COPD) exacerbations in patients with severe COPD; and Viibryd for the treatment of adults with major depressive disorder (MDD). The company has products under new drug application review by Food and Drug Administration comprising Aclidinium for the maintenance treatment of COPD; and Linaclotide for the treatment of constipation-predominant irritable bowel syndrome and chronic constipation.

To review potential trading opportunities with Forest’s stock, please take a look at the 1-year chart of FRX (Forest Laboratories, Inc.) below with my added notations:

1-year chart of FRX (Forest Laboratories, Inc.)

FRX appears to be forming a double top price pattern (blue) from July until now. Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. FRX would confirm its pattern by breaking below the $42 support (red) that has been created by the double top pattern.

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The Tale of the Tape: FRX could be forming a double top pattern. A long trade could be made at $42 or on a move above $45 (resistance). A short trade could be made on a break of $42, which would confirm the double top.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

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