Teva Surges 5.32% on Bullish Technical Signals, Extending 10.14% Two-Day Rally

Teva Pharmaceutical (TEVA) has surged 5.32% in the most recent session, extending its two-day winning streak with a cumulative gain of 10.14%. This sharp upward movement warrants a detailed technical analysis to assess its sustainability and potential for further gains. Below is a structured evaluation using multiple methodologies, with key confluence and divergence points highlighted.

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Candlestick Theory

The recent price action forms a strong bullish continuation pattern, characterized by long upper shadows and closing near highs. Key support levels are identified at $18.26 (September 19 low) and $17.94 (August 29 low), both of which have previously acted as barriers to further declines. Resistance is evident at $20.43 (September 30 high) and $19.18 (September 29 high), where prior consolidation occurred. A break above $20.43 could signal a test of the next resistance at $21.00, while a pullback to $18.26 may trigger a retest of the $17.94 level. The formation of higher highs and higher lows over the past two weeks suggests a potential continuation of the uptrend, but traders should monitor for bearish reversal patterns like a "shooting star" or "dark cloud cover" if the price stalls near resistance.

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Moving Average Theory

The 50-day, 100-day, and 200-day moving averages all trend upward, with the 50-day MA (current ~$18.80) above the 100-day (~$18.50) and 200-day (~$17.60) MAs, confirming a bullish bias. The price remains above all three, reinforcing the uptrend. A key confluence point occurs if the 50-day MA crosses above the 100-day MA, which would strengthen the case for a sustained rally. Conversely, a drop below the 200-day MA would signal a potential shift to a bearish bias. The recent acceleration in price suggests the short-term momentum may outpace the long-term averages, creating a risk of a pullback to align with the 100-day MA.

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MACD & KDJ Indicators

The MACD histogram has expanded recently, indicating growing bullish momentum. A crossover of the MACD line above the signal line (last occurred on September 29) supports the continuation of the uptrend. However, the KDJ indicator shows the stochastic lines (K at ~85, D at ~75) in overbought territory, suggesting a potential short-term correction. A bearish divergence is emerging: while the price reaches new highs, the K line is declining slightly, hinting at weakening momentum. Traders should watch for a pullback to the 50-level on the KDJ (around $18.70) as a potential entry point for long positions.

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Bollinger Bands

The price has recently touched the upper band of the Bollinger Bands, reflecting elevated volatility. The bands have been narrowing over the past week, a precursor to a potential breakout. The middle band (20-day MA at ~$19.00) currently acts as dynamic support. If the price consolidates within the bands and breaks above the upper band, it could signal a continuation of the rally. A drop below the lower band (~$17.80) would indicate a possible reversal to the downside, with the 200-day MA as a critical level to watch.

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Volume-Price Relationship

Trading volume has surged in the past two sessions, with the most recent day's volume (~19.9 million shares) significantly higher than the 30-day average (~14 million). This validates the price strength and suggests strong institutional participation. However, if volume begins to taper off while the price continues to rise, it could indicate a lack of follow-through, increasing the risk of a pullback. Conversely, a surge in volume during a pullback would signal renewed buying interest and a potential resumption of the uptrend.

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Relative Strength Index (RSI)

The 14-period RSI has climbed to ~68, nearing overbought territory. While this does not yet confirm a peak, it warns of potential exhaustion in the short-term rally. A close above 70 would trigger overbought conditions, but divergence is already present: the RSI has not kept pace with the price’s recent highs. A bearish crossover of the RSI below 60 may precede a correction, with key support levels at 50 and 40. Traders should avoid aggressive long positions until the RSI retreats to the 50-60 range.

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Fibonacci Retracement

Applying Fibonacci levels to the recent swing low ($17.94 on August 29) and swing high ($20.43 on September 30), key retracement levels are at $19.44 (38.2%), $19.04 (50%), and $18.64 (61.8%). The price is currently consolidating near the 38.2% level, which may act as a temporary support. A breakdown below $19.04 could lead to a test of the 50% level, while a rebound above $19.44 may target the $20.43 high.

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Backtest Hypothesis

The proposed backtesting strategy—buying Teva when the RSI crosses above 70 and exiting when it drops below 70—would not have triggered any trades between 2022 and 2025, as historical RSI data shows no instances of overbought conditions (highest RSI was 52.92 in December 2024). This suggests the strategy is misaligned with Teva’s recent price behavior, which has remained in a sideways-to-bullish trend without reaching overbought levels. Alternative approaches, such as using a lower RSI threshold (e.g., 60) or combining RSI with moving average crossovers, may yield better results.