Somebody Is Still Shorting $TEVA. The Data Says They May Regret It

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Somebody is still shorting Teva Pharmaceutical Industries into this, and the FINRA data doesn't care about anyone's opinion. It counts.

$TEVA sits at $39.80, $2.22 below its 20-day high of $42.02 and $1.55 above its 20-day low of $38.25.

My read: neutral, waiting on confirmation. I want confirmation before I call a direction.

The shorts have a problem

Against its own 60-session range, $TEVA is 5.3% below the high of $42.02 (Oct 9) and 17.8% above the low of $33.78 (Aug 3).

$TEVA closed higher in 3 of its last 9 sessions. Volume over the last five sessions averaged 0.6x the twenty sessions before them.

The largest one-day move in the past twenty sessions was +4.7% on Oct 9. 44% of off-exchange volume was short sales.

Days to cover: 5.4. Every short in the name needs 5.4 full days of normal volume to get out.

What I make of it: a crowded short matters only if the stock stops falling, and then covering becomes buying. Whether that starts here is the whole question.

Who is positioned for what

Days to cover 5.4, 29.8M shares short, short interest -8.8% since the last report. Squeeze risk 5 of 100; shorts pressing 58 of 100.

Across the broader market, the read is Lean bearish (bias -23). Insiders: quiet.

On the daily chart, technical patterns include gravestone_doji, bullish_marubozu, bearish_harami in a flat trend.

Price is below its 20-day average of $40.17 by 0.9%.

What I make of it: the pieces mostly point the same way as the price, which is more than I can say for most setups. None of them is proof.

The bull case

• Short squeeze setup with a measured path to $41.88

The bear case

• Backdrop: Lean bearish (bias -23)
• Borrow cost decides who exits first

What I think traders are overlooking

What I think traders are overlooking is the volume. Price can drift to a level on almost nothing, and what it does there needs real participation. Without it, a break is easy to fade.

None of that is visible in the candles.

What happens next, and when I'm out

If $TEVA posts a close above the recent high on rising volume and volume expands, I think $41.88 becomes the next serious test. Under $35.82, I'm wrong.

The honest objection is that short volume is not a short position. A high ratio is routine in liquid names, and sometimes the shorts are simply right.

Clear the level on volume and I'm interested. Fail below the line and I'm out of the idea.

Kill switch

Any one of these and the thesis is over, no averaging down, no renaming it.

• A close through $35.82.
• Selling absorbs the buying at a key level and price loses it on volume.
• Order flow reverses: the sweeps and blocks turn to the other side.
• A scheduled event changes the picture before the trigger is reached.

My read

No edge yet, and I'd rather say so than invent one. The confirmation is the trade.

Desk record. 7 of 19 scenario targets traded before their invalidation (37%), 12 stopped out, 0 ran out of time, average outcome +6.2% per piece. Past pieces say nothing about this one.

The desk's scenario leans bullish. Bull or bear, the kill switch above is what keeps either view honest.

Sources and further reading: SEC EDGAR filings for TEVA · FINRA daily short sale volume files · Nasdaq short interest: TEVA · Teva Pharmaceutical Industries Limited investor site · TEVA quote, chart and data on StockMarketLoop.

Data as of Oct 23, 9:40 AM ET: options positioning, FINRA short volume, the off-exchange trade record, the structure map, SEC filings and the ticker's headlines. Vaughn McNair (Grandmaster-Obi) and Making Easy Money may hold or trade positions in the names discussed. This is speculation and education, not financial advice.