Will Roche Stock Rebound After A 3% Fall In A Week?

The stock price of Roche Holding’s ADR (OTMKTS:RHHBY) reached its all-time high of $51 in August, before a recent sell-off in the stock, which led to a 3% drop in its price in five trading days to levels of $47 currently. There were multiple developments for Roche over the last few days. Roche has agreed to acquire TIB Molbiol Group for an undisclosed amount, and the deal is expected to close in Q4 of 2021. The acquisition will help Roche expand its portfolio of molecular diagnostics solutions. Roche also announced an alliance with Adaptimmune to commercialize its cancer therapies. Roche and Adaptimmune will work on up to five undisclosed targets, aiming to develop off-the-shelf T-cell therapies. Roche will pay an upfront amount of $150 million to Adaptimmune, followed by another $150 million over five years. ^[1] The overall deal value could exceed $3 billion with development, regulatory and commercial milestones payments, but it will mean Roche finally entering into cell therapy, a market which now appears to be lucrative, with average growth rates estimated to be in low-teens over the coming years.

Now, after a 3% fall in a week, will RHHBY stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for RHHBY stock average 2% in the next one-month (twenty-one trading days) period after experiencing a 3% drop over the previous week (five trading days), implying that the RHHBY stock can see higher levels from here. Also, Roche has also benefited from a strong growth in its diagnostics business, courtesy of the company’s Covid-19 tests. While the rise of vaccination rates will result in lower testing demand eventually, the spike in new Covid-19 cases from the delta variant will likely result in continued demand for testing in the near term.

But how would these numbers change if you are interested in holding RHHBY stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Roche stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF RHHBY stock moved by -5% over five trading days, THEN over the next twenty-one trading days RHHBY stock moves an average of 3%, with a good 69% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Roche Stock Movements:

Question 1: Is the average return for Roche stock higher after a drop?

Answer: Consider two situations,

Case 1: Roche stock drops by -5% or more in a week

Case 2: Roche stock rises by 5% or more in a week

Is the average return for Roche stock higher over the subsequent month after Case 1 or Case 2?

RHHBY stock fares better after Case 1, with an average return of 3.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.5% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Roche stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Roche stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For RHHBY stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Roche after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Roche stock by changing the inputs in the charts above.

While Roche stock looks like it can gain more, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Mettler vs Abbott.

See all Trefis Price Estimates and Download Trefis Data here

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1. Adaptimmune Press Release, Sep 7, 2021 [↩]