Novartis (NVS) has broken a major downtrend from 2015 and build a four-month base pattern with heavy volume. I generally prefer a bigger base pattern, but NVS is ready to rally, so I see no reason to delay probing the long side. Let's turn to the charts so I can show you the bullish developments since October.
In this one-year daily bar chart of NVS, above, we can see a tale of two charts. The first chart is on the left side, from March to the end of September. Notice the relatively light volume? Now shift your eyes to the right side of the chart and see the volume pattern since October -- much heavier. Heavy volume when a stock is at a relatively low point is a sign of aggressive selling meeting aggressive buying. Some investors are anxious to get out of NVS, and there are others that are equally anxious to buy NVS.
Normally, aggressive selling would keep the downtrend in force, but there is enough buying to absorb the selling and halt the decline. Prices turn up in December and the slope of the 50-day moving average turns bullish this month. NVS closed above the flat 200-day moving average line last week. The On-Balance-Volume (OBV) line changes direction in January and the trend-following Moving Average Convergence Divergence (MACD) oscillator rises above the zero line in late December for an outright go long signal.
In this three-year weekly chart of NVS, above, we can see that prices topped above $105 in mid-2015 and fell below $70 by November 2016. The price gains over the past three months have broken the downtrend from 2015, just as the 40-week moving average line has flattened and NVS has closed above this indicator.
Notice the heavy volume and the strong move up in the weekly OBV line. The weekly MACD oscillator is still below the zero line but a fresh cover shorts buy signal in January is a good start.
In this Point and Figure chart of NVS, above, we can see a small consolidation pattern in the $67 to $74 area and the breakout at $75. $91 is the potential upside price target.
Bottom line: NVS has not made a one-year base pattern, but it has seen very heavy volume since October. It is hard to ignore this kind of concentrated aggressive buying. Traders should look to go long NVS in the $78 to $76 area, risking below $73 for now.