Bristol-Myers Squibb Stock Is A Speculative Buy (Technical Analysis) (NYSE:BMY)

Bristol-Myers Squibb, Inc. (NYSE:BMY) is in the health care sector and in the pharmaceutical industry. While not a factor in my analysis of the company, BMY is expected to have 2024 annual revenue of $45.85B and annual earnings per share of $6.83. BMY is also yielding a safe 4.43%. In this article I will outline why I think BMY is a speculative buy at this price. It is speculative because not all of my preferred parameters are in place yet as I will outline in the article. My investment thesis will be formed by analyzing the price action, momentum, volume, and relative strength of BMY in two different time frames.

Chart 1 – BMY Monthly with 10-Month EMA, Volume, and Percentage Price Oscillator

Chart 1 above shows the big picture monthly price action for BMY going back six years. A simple method I use to determine if I should buy a stock is if the stock is above its 10-month exponential moving average (EMA) which is shown in blue. Generally, if the stock is above its 10-month EMA that foreshadows good things and is considered bullish price action. On the other hand, if the stock is below its 10-month EMA that foreshadows bad things and is considered bearish price action. What catches my eye in Chart 1 is the price action of the last five months. BMY has consolidated below the 10-month EMA from November 2023 to February 2024. This consolidation is an important step for stocks to go through before they can meaningfully move higher. This consolidation stage is considered a place where institutional investors accumulate shares prior to the expected advance. You can see this consolidation pattern has happened before when BMY was below its 10-month EMA. Look at the green box showing the recent consolidation pattern. It is like the price action that occurred in the fall of 2021 and in April – August 2019. In these cases, BMY dropped below the 10-month EMA and declined considerably. Then prices tracked sideways for a few months in a consolidation pattern. Then the stock had a big bullish move upwards toward the 10-month EMA. In the 2019 and 2021 examples, prices were able to close above the 10-month EMA on the big bullish candle indicating a clear buy signal. In the current example there is not a clear close above the 10-month EMA which is why I consider BMY a speculative buy now.

Looking at volume, I am encouraged by the big volume bar in March. That shows that institutional investors, smart money, are accumulating shares while the price is rising. When technical traders like me analyze volume charts we see big volume bars as evidence of institutional or smart money investors because they have the capital to purchase millions of shares. Retail traders like you and I don’t have enough capital to cause a large volume bar. Back to the institutions or smart money, the only reason they do buy shares is because they believe that BMY is undervalued at these prices. I think the big volume bar is a bullish confirmation signal.

Momentum on the monthly chart is starting to turn bullish. The bottom pane of Chart 1 shows the Percentage Price Oscillator (PPO) which is a momentum indicator. Momentum is shown in two different ways. When the black PPO line is below the red signal line that is considered short term bearish momentum. When the black signal line is below the centerline or the zero level of the chart, I consider that to be a sign of long term bearish momentum. I say long term because the black PPO line doesn’t oscillate above or below the centerline or zero level of the chart too often compared to the number of times the black PPO line crosses above or below the red signal line. Right now, momentum is both short term and long term bearish. That’s not the type of situation I want to invest in which is why I consider BMY a speculative buy. The only bullish indication on PPO is that the black PPO line is starting to curl upwards. That’s a start in the right direction.

Now I want to zoom into the weekly chart using the same indicators to see if there are more reasons to be bullish on BMY.

Chart 2 – BMY Weekly with 30-week EMA, Momentum, Volume, and Relative Strength

Chart 2 shows my preferred timeframe, the weekly chart. This allows me to keep away from the daily noise and focus on the medium to long term price action. The 30-week EMA allows me to do this. I prefer to buy stocks that are above their 30-week EMA. BMY fits that bill. You can see inside the green box, the five-month consolidation period that I mentioned previously. Price has formed a double bottom on the weekly chart and is now above its 30-week EMA. The 30-week EMA itself has flattened out. I would feel better about an immediate price advance of BMY if the 30-week EMA was trending higher instead of being flat. That is another reason why I consider BMY a speculative buy.

Looking at the volume, the big red bar stands out and appears to be bearish. However, it is institutional activity, as I mentioned previously, and price didn’t decline after that. Also, it is clearly part of the big bullish volume bullish bar I mentioned in Chart 1. I consider volume to be bullish on Chart 2.

Momentum is shown in the first pane of Chart 2. Zooming in to the weekly chart allows us to see short term bullish momentum displayed by PPO. Obviously, the trends in price action and momentum change in the lower time frames first before they change in the monthly time frame. I would prefer to see the black PPO line above the centerline of the chart to show long term bullish momentum on the weekly scale, but that is not the case now. That is why I say that BMY is a speculative buy at this point.

The bottom pane of Chart 2 shows the relative strength of BMY to the SP 500 index. If you’re like me and you want to outperform the SP 500 index you must own stocks that outperform the SP 500 index. The relative strength chart helps you do that. The chart is easy to read. The black line is a ratio of the price of BMY to the price of the SP 500 index. When the black line is falling that means that BMY is underperforming the SP 500 index. When the black line is rising that means that BMY is outperforming the SP 500 index. I want to own stocks that are outperforming the major index. Since late January 2024 BMY has matched or slightly outperformed the SP 500 index. I would feel better if the relative strength line was clearly moving higher, and that may happen soon, but it is not the current condition. Again, another reason why I say that BMY is a speculative buy under these circumstances.

In summary, BMY is a stock that has a nice current yield, that is considered safe, with slightly higher revenue prospects for 2024 and slightly lower earnings prospects for 2024. BMY has fallen considerably and looks to have consolidated over the past several months similarly to how it has acted before previous price advances in 2019 and 2012. Volume shows signs of institutional accumulation. Momentum has work to do on the monthly chart and shows short term bullish momentum on the weekly chart. Lastly, relative strength is even with the SP 500 index over the past several months and may be turning higher. All this leads me to believe that BMY is a speculative buy. A speculative buy means I may enter a small position and would look to add to it if price action, momentum, and relative strength continue to improve. For example, if price continues to advance causing the 30-week EMA to trend higher, I will see that as a sign to add more shares. That price level could be $57-$60, but that is just a guess. As always, I would have to refer to the price chart. If the weekly PPO line crosses above the zero or centerline, that would be a sign to add more shares. When I see those things happen, I will consider BMY to be a conviction buy instead of a speculative buy like I see BMY now. If the price and momentum improve as I just outlined, a retest of the 2022 highs of $77 wouldn’t surprise me at all, but that is not a prediction on my part. It is just an observation of where price could go under reasonable circumstances. I am aware that my analysis could prove incorrect due to several reasons. Revenue and earnings reports could disappoint, economic growth could fall, interest rates could climb higher, or there could be some geopolitical event that causes the overall market to decline. All of that is beyond my control. What is in my control is the amount of my starting position. That is why I would start with a small position and be willing to take a small loss if things fail to move in a bullish manner. Failing to move in a bullish matter would be a close below the 30-week EMA or price declining 10% from the entry price for example. If I saw that, I’d rather take a small loss and reevaluate my thesis than stay in a losing position that suffers a major decline. I can always get back in BMY if the price action, momentum, volume, and relative strength improve. To me it is okay to be wrong on my stock analysis, but it is not okay to stay wrong.