Biogen Inc. (BIIB) was upgraded to a "buy" by TheStreet's Quant Ratings service on Wednesday. This biotech name has made a chart that could be challenging to many traders and investors. Let's drill down and see if an easier approach to the long side can be found.
In the daily bar chart of BIIB, below, we can see two dramatic price gaps or voids. The first gap is to the downside in March. Prices fell for just a couple more days after the gap and then stabilized and traded sideways until the middle of October. October generated another gap but this time to the upside and not as powerful as the gap back in March. Here prices only soared around $50 but the gap in March cost longs more than $80. Today BIBB is above the rising 50-day moving average line and above the 200-day average line which has started to bottom.
The On-Balance-Volume (OBV) line made a low in late March and has been rising since then and telling us that buyers of BIIB have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is bullish.
In the weekly bar chart of BIIB, below, is a little hard to work with as the gaps are replaced with long high/low bars. Prices are above the 40-week moving average line but the line is still pointed down.
The OBV line on this long-term scale is close to breaking out to a new high and the MACD oscillator is about to cross the zero line for a buy signal.
In this Point and Figure chart of BIIB, below, the sideways price action at the bottom of the chart is accumulation and it generated a potential upside price target of $506.
Bottom-line strategy: Prices could move dramatically higher but longs or new buyers will have to risk below $275 for now.
