Shire (full-year earnings 14 February)
Pharmaceutical giant Shire has been in the news of late as bid rumours swirl, but brokers remain sceptical that the firm will be taken over, due to its specialty drugs businesses. These niche products would tend to suggest that any competitor attempting to enter the sector will face significant barriers to entry. We look for further commentary on the Baxalta integration, which at the first-half stage was progressing well. At just ten times forward earnings there looks to be plenty of value left in the shares.
There has been only one approach where Shire’s price action has been concerned, namely to sell the rallies. An attempt to break back above £40 failed in December, and then we saw the £35 zone taken out. A daily close above £40 would be needed to reverse the bearish picture, and unless this happens, stochastic moves into overbought territory should be regarded as potential indications of a selling opportunity.