Though Regeneron Pharmaceuticals (REGN) could stage an oversold-technical rally of $30 or $40 or even $50 in the short-run, the bigger picture is a large negative pattern that chartists call a "double top."
Chartists or technical analysts have been using the label for around 115 years to describe a large top reversal pattern. This chart of REGN, above, is an example. Look at the twin peaks at $600, first in August and again in November. (Note, peaks in double tops should be at least one month apart.) Prices broke down in early January to break below the 200-day moving average and recently to break the October low or the trough of the pattern. The On-Balance-Volume (OBV) line is pointed down, which tells us that the sellers of REGN have become more aggressive with heavier volume on down days. The 50-day moving average is about to cross below the 200-day average, in what Japanese chartists call a (bearish) death cross.
The technical reason why we could see a short-term rally is that we can see a small bullish divergence between the lower lows in price and a higher low from the momentum study. A higher low in momentum tells us that the rate of decline in prices is slowing. This divergence suggests a bounce could occur. But without a period of accumulation and a rising OBV line, I suspect the rally will fizzle out.
The top on the daily chart becomes hard to ignore on this weekly chart, above. The Moving Average Convergence/Divergence oscillator is very bearish is this chart. Prices have broken below the 40-week moving average and the average line is turning down. Taking the height of the pattern (the distance from the October low to an imaginary line between the two peaks) and subtracting it from the October low gives us a price target or objective in the $325-$300 area. This is a pretty bold forecast, but years of empirical research back in the early 1900s found that these large patterns frequently played out.
Only experienced, nimble traders should try to negotiate a rally here. The bigger risk based on this double top is a longer and deeper bear phase for REGN.