This isn't what you would call a banner 2016 for Alkermes (ALKS). Disappointment in the top-line results from a depression drug have cut shares in half this year, but the tide looks like it may be turning. Bulls are starting to sniff the stock again. It's possible things come back around for the depression drug as it can be a bit more difficult to measure versus something like a tumor. This isn't a one-trick pony. Revenue is still expected to grow in the 10% to 20% range next year, although the company will still be in the red. Biotech names will often run in anticipation, and it's looking like some buyers might be bottom-fishing here.
If we simply look at pure price on the daily chart, the clarity of importance around this $40 level is easy to see. This was the gap -- nay, the crater -- left in the wake of the January disappointment. It's clear there has been no action between $40 and $58 when we look to the left of the chart at the volume by price. This creates the potential for a vacuum. It also represents the possibility of volatility in the air pocket. There won't be a recent past to glean information for trading, but we do know $40 will become support, as well as the current bull flag highlighted in yellow. Given the $10 move in the recent bullish channel, the minimum upside expectation here is $43.33 with a high side of $50. This is one where I don't expect the gap to be filled in the near term, but $3 to $5 is a very reasonable expectation.
The longer-term weekly chart is just as ugly in retrospect, but also optimistic in the near-term. Note how we see the same $40 resistance level, but now we can trace it back to 2014. That lends credence to the thesis that a move to about $40 could give a kick higher. We're seeing a bullish cross on the MACD, the five-week simple moving average (SMA) has crossed above the 13-week SMA as well. The full stochastics has already crossed over bullish and did so while oversold. It's now pushed over $50, which has been a positive sign in the past.
Finally, the StochRSI is very strong, along with the Chaikin Oscillator, so momentum and volume appear to be working. A longer-term trend has to be willing to give this $5 or even $10 to the downside, so it can't be seen as anything other than a small, aggressive position; however, there is a $10 to $15 upside over the next six to 12 months against a smaller downside and a lot of pessimism already factored into the name.
I'm taking a small, speculative long position with the idea of a swing trade at the very minimum. I would take profits into $45 no matter the timeframe; however, if we do nothing over the next few weeks I'll look to use the 13-week SMA as a stop.
