Biogen Inc: BIIB Stock Chart Suggests Patience Warranted

BIIB StockBIIB Stock: Awaiting the Bull

I have been patiently waiting for a bull market to begin in Biogen Inc (NASDAQ:BIIB) stock. I got my hopes up after the United States presidential election results revealed that Donald Trump was the victor, and BIIB stock—and the entire biotech sector—surged in the wake of this result.

Little came of the initial surge, and with good reason: Donald Trump has made it clear that he will no longer allow the predatory pricing schemes that have tarnished the pharmaceutical sector to continue.

In 2015, these business practices hit the limelight, and both presidential candidates vowed to crack down because business bottom lines are not as important as the the lives of American medical patients that require these products to survive.

I believe that the thrust of this negative news is now priced into BIIB stock, and it can now rise from the ashes like a phoenix, and a new bull market can commence from here.

The following Biogen stock chart illustrates the reasons why I still believe a bull market can develop.

biogen

Chart courtesy of StockCharts.com

There are two distinct reasons why I have continued to look for a bull market to develop in Biogen stock.

The first reason stems from the Fibonacci retracement numbers that are highlighted in green on the BIIB stock chart above. These numbers are a very popular tool used by many technical traders. This tool is used to identify countertrend price objectives.

In theory, when a stock price corrects from a primary trend, it will retrace approximately 50%-62% of the primary move. Traders refer to this retracement as “trading into the box,” and it is highlighted in blue on the chart above.

Traders use the box as a zone in which to cover their short positions and/or start building long positions. The theory behind Fibonacci numbers is that once the sell-off is complete, the predominant trend is ready to reassert itself and a new bull market will commence.

The second reason stems from the moving average convergence/divergence (MACD) indicator, which is highlighted in the lower panel on the BIIB stock chart above. MACD is currently converging, and a bullish cross can occur in the weeks ahead.

MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. A bullish cross would support a new bull market in BIIB stock because it would suggest that the predominant trend lower has officially ended and that a new trend toward higher prices has begun.

For a trader, this means that the bulls are once again in control of Biogen stock, and a trader would be on the lookout for bullish setups when this indicator is engaged.

The inability to generate a bullish cross may be a warning sign of things to come. Biogen stock was looking good after the U.S. election results were released, but since the initial surge higher, BIIB stock has fully retraced the entire run that began. I continue to wait for this signal to generate.

The following Biogen stock chart illustrates the price action that followed the presidential election.

biogen1

Chart courtesy of StockCharts.com

Biogen stock has gone full circle after the election, but the pullback in price has been constructive. The BIIB stock chart above illustrates that price action has been contained in a descending channel.

A descending channel has two parallel trend lines that define upper resistance and lower lows. The share price oscillates between these two trend lines for as long as the bearish trend permits.

A break above resistance would indicate that the bearish trend has ended and that a new bullish trend has begun. Perhaps such a break would also coincide with the bullish MACD cross that I have long been awaiting.

Bottom Line on Biogen stock

I still believe that a bull market in Biogen stock can commence. Patience is warranted, as a confirming signal from the MACD indicator has yet to generate, but it is still possible in the weeks and months ahead. Until that fateful day, I will continue to watch BIIB stock with a neutral bias.