Is There Still a Play to Be Made on Regeneron?

 | Nov 24, 2013 | 9:00 AM EST
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U.S. biotech company Regeneron Pharmaceuticals (REGN) held one of the coveted spots on Friday's leader board. Along with its development partner Sanofi (SNY), Regeneron reported positive Phase 3 results from patients taking their rheumatoid arthritis drug sariumab.

Rheumatoid arthritis is a progressive autoimmune disease that results in chronic inflammation and pain in the joints, the tissue surrounding the joints, and even other organs in the human body.

The approximately 1,200 patients enrolled in the study took either the drug methotrexate and a placebo and methotrexate and sarilumab. According to the two companies, not only did patients taking sarilumab report a statistically significant decrease in pain levels, but they also saw an improvement in physical function and the drug appears to inhibit the progression of joint damage as well.

This is not the first time Regeneron's headlines caught the attention of the market's bulls. Its shares have been on the move over the past several years. It broke $100 per share in early 2012 and peaked at $319.83 per share on Sept. 30. After such an incredible move already, the major question potential investors are now asking is whether or not Regeneron can keep the trend going.

The overall upside channel has started to slow over the past several quarters in Regeneron. It experienced a two-wave correction over the course of the summer that led to another break to the upside from August through September. The rally, however, was not quite as strong as other recent runs and on the weekly time frame it barely breached prior highs before once again pulling back in.

Could this be a sign of weakening momentum and a larger correction on the horizon? Perhaps, but it's not likely that this will be the case quite yet. Currently Regeneron is in the process of developing another potential swing on the upside on the daily time frame.

Trade Station Chart Analysis

Another form of a two-wave correction unfolded throughout October and into early November into strong weekly support. Unlike the summer correction, however, the second wave of selling this time around led to a lower low than the first. So, while Regeneron had a nice breakaway gap on the daily time frame coming off the second low, it will face an even bigger battle as it approaches prior daily highs than it did over the summer.

In fact, there is strong potential that an inverse head and shoulders pattern could develop over the next several weeks after it retests the $305 to $310 per share zone. From a bullish perspective, this will be an even greater sign of confirmed strength than if shares were to continue to push to a higher high from these levels without pausing for a couple of weeks. This will create an upside target per share zone of $350 to $360 that I would expect to hit prior to the end of January. 

Trade Station Chart Analysis

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