Alexion Pharmaceuticals (ALXN) is breaking down from a large two-year top formation. Despite a significant selloff already since July, further declines are anticipated.
ALXN moved in a broad, sideways trading range during 2015, but it eroded beneath the surface. In this chart of ALXN, above, one can see that the On-Balance-Volume (OBV) line peaked in July and worked lower despite its October to December rally. A relatively flat OBV line when a stock moves higher should tell you that buyers are not committing to the upside. Also note the so-called "death cross" of the 50-day and 200-day moving averages in September. Recently, ALXN broke below its September lows, giving probably everyone who bought this stock in the past two years a loss.
The top formation on ALXN can be seen more easily in this weekly chart, above. A $140 to $200 trading range goes back to early 2014, and with prices below the declining 40-week moving average we can say the trend is now down. Also, the OBV line peaked in early 2014 on this weekly timeframe. The Moving Average Convergence Divergence (MACD) oscillator peaked in early 2014 as well. Big top formations usually result in big drops as investors have had months to liquidate their long positions.
The next potential support levels are the $120 and the $100 areas from 2013. ALXN is relatively oversold so traders should use a short-covering rally to do additional selling.