What determines price?

One never knows where the next impact to a security will come from. Recently Takeda Pharmaceutical (TKPYY, Japanese ADR ) was in the process of acquiring Shire PLC (SHPG, Irish ADR ). Funny thing happened along the way. The last Takeda to man the helm appeared before the board of directions and informed them he could not support this action and thought it was unwise and a risky financial proposition. So what happened then and how will that affect the acquisition? It is hard to predict what will happen but let us look how it has already affected pricing.

SHIRE CHART

Typically, what one would see is price escalating of the company being acquired. Not so in this case, it was just moving along as though there was nothing in the works. It certainly was no secret as Takeda needed to get approval from European commission to get it done.

 

TAKEDA CHART

 Takeda has been in a long term down trend with no outstanding blips that started back in February of this year. That is until Mr. Takeda made his case and price gapped down on both companies.

So, what does this tell us of how to trade these companies? It does not tell us anything. That is the quirky thing about the market. People are unpredictable and make the market unpredictable. This is why we need more than the news and the P&L statements. People are what drive the market. We need to see how the sentiment of the people affect price. If you are really good at reading the charts, particularly the candlestick charts you can see what is happening. If not, you may need some additional tools. Tools much like you will find on this website. Ways to clearly see what price is doing and what it is likely to do in the near future.

The posted charts tell us many things. They tell us that Shire was trading in a trading range affected by two zones of importance. One was a Bullish support zone and the upper level was a Bearish support zone and price was trapped between the two. Even the gap down still remained inside the corridor created by the two zones. They also tell us, on the Takeda chart, a Bearish support zone was created back in June of 2018 and price has never broken that zone being rejected twice and breaking every Bullish zone below it. The down trend was firmly established months ago.

Could you tell this by looking at the charts? No? Then maybe it is time you checked out what Tested Wisdom Trading has to offer.

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