Celgene Corp. (CELG) has become a "falling knife" on the charts. We looked at the charts earlier this month, where we said, "CELG could see some modest weakness in the short run but the weekly chart and the Point and Figure chart suggest higher prices lie ahead. Risk a close below $125."
Prices gaped lower from above $135 just a few days ago to under $125 and below the 200-day moving average line (see the first chart below). The close below $125 was our line in the sand from a technical perspective. Thursday morning ahead of the NYSE opening bell, CELG was again down sharply, trading around $108 and below the June lows. In a word -- ugly. Our charts won't show this price action, but let's see what this weakness may do to the indicators.
In this daily bar chart of CELG, above, we have to use our imagination to visualize the gap down that is anticipated with CELG trading below $108. This weakness would break the June low and the lows set back in December and January.
The slope of the 50-day moving average line is already negative, and the slope of the 200-day average line is starting to crest. The daily On-Balance-Volume (OBV) line has already weakened this month, with signs of aggressive selling. There is no divergence yet from the momentum study in the lower panel.
In this weekly bar chart of CELG, above, we don't have the price action of Thursday morning, but we know prices are making new lows for the year to date. Prices are under the flat 40-week moving average line and the weekly OBV line has turned down. The trend-following Moving Average Convergence Divergence (MACD) oscillator has already given a take profits sell signal.
In this Point and Figure chart, above, we can imagine that the column of Os extends to $108.68 or even $107.61. A bearish downside price objective/target measures to $88.44, but support looks like it might develop below $104.
Bottom line: a lot of price damage has happened in a relatively short period of time. I would be in no rush to be a buyer. This kind of decline typically needs a long period of repair -- backing and filling or consolidation to demonstrate that prices have stabilized and new buyers have shown up.