Checking Regeneron for Symmetry

 | Mar 23, 2014 | 6:00 PM EDT  | Comments
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When a market starts to fall apart, one of the first things I do is back up and look at the bigger picture to prepare myself for possible opportunities. In most cases, this means a weekly or monthly chart. In the case of Regeneron Pharmaceuticals (REGN), one of the suffering biotechs, we will use the weekly chart.

One of the most important technical tools that I use every day is what I call symmetry. My definition of symmetry in the market is similarity or equality when comparing swings in the same direction. Other technicians will call this a measured move. It is where I will measure 100% of a prior swing and then project that same amount from another low or high to compare the new swing to the prior swing. Running these projections will often identify key support or resistance decisions, depending on what direction you are coming from. I find that many swings in a stock or index will often be similar to others on whatever chart you analyze. I find this on not only the daily and weekly charts, but also intraday charts, such as a 30-minute bar chart and even five-minute charts.

Regeneron Pharmaceuticals (REGN) -- Weekly
Source: Dynamic Trader

Let me show you on this weekly chart what I'm talking about. I have labeled three prior rally swings on this chart that are very similar. The first swing was $95.46, the second was $92.19 and the last rally into the March 2014 high was $94.80. So running 100% of these prior projections helped me to identify a rather important resistance decision in REGN. The resistance cluster came in at the 349.88-359.90 area. This zone included those two prior "symmetry" projections along with a couple of other key price relationships. The actual high was made at 352.49. So on this chart, I just demonstrated symmetry of prior rally swings.

Now it's time to look at symmetry projections of prior declines to help identify possible support as this stock experiences a relatively violent pullback. The prior declines I'm focusing on lasted $77.69, $54.63 and $62.14. I have projected 100% of these prior declines from the March 2014 high and these projections overlap other key Fibonacci price relationships.

I'll get to the point: There are two zones I want to watch for possible support in REGN around the symmetry projections. The first zone comes in at 290.35-297.86. The second zone comes in at the 274.80-280.49 area. If REGN trades down into one of these key zones, I will see if price holds above the zone and then look for a buy trigger that tells me it is worth placing a bet on the buy side. If price blows through these same key zones, I will back off the buy side until further notice.

Please refer here for general guidance on Fibonacci trade setups.

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