Celgene Stock Is All Set for a Push Towards Higher Prices

CELG StockCELG Stock: Favorite Biotech

The biotech sector has been lagging behind the major market indices, and I am finding it difficult to remember a major market advance in the NASDAQ when this sector did not lag. I have been watching this sector with a keen eye for some time, and now there are indications suggesting that the biotech stocks are ready to join in on all the fun. 

Celgene Corporation (NASDAQ:CELG) stock is my favorite biotech name, and the reason why is actually quite simple. The CELG stock chart is compelling and constructive, and the indications that litter the price chart continue to suggest that higher prices are likely. To magnify my level of bullishness, Celgene stock is perfectly set up for an advance.

For anyone who hasn’t had the pleasure of reading any of my previous publications, it is worthy to note that my investment views are generated using technical analysis. This method of analysis is based on the notion that historical price and volume data can be used to discern a trend and forecast future prices. As a result, I take my cues from the indications that are produced on a company’s price chart.

I have spent the last two decades applying myself to this craft, because the information it provides is extremely valuable, especially when it is applied it to an investment strategy.

The following long-term Celgene stock chart illustrates two indications that make this a compelling investment.

CELG stock chart

Chart courtesy of StockCharts.com

The reason I dubbed Celgene a compelling investment is that the long-term chart suggests that the predominant trend is geared towards higher prices, and a momentum indicator is suggesting that the current path of least resistance is towards higher prices.

The predominant trend on the Celgene price chart above is easily defined using a simple uptrend line. This simple uptrend line is created by connecting the troughs on the price chart. This uptrend line captures the quintessential characteristic of a bullish trend: an immaculate trend containing higher highs and higher lows, which progressively takes the price from the lower left to the upper right of the price chart.

Using this uptrend line as a tool is actually quite a simple endeavor and, as long as CELG stock is trading above this uptrend line, I can only assume that higher prices will prevail. Breaking below this uptrend line would serve to suggest that the bullish trend has concluded, and that a larger correction could be expected to follow.

The moving average convergence/divergence (MACD) indicator is the next reason why I find this investment compelling. MACD is a simple and effective trend-following momentum indicator that uses signal-line crosses to distinguish between bearish and bullish momentum. A bullish cross was generated earlier this year, and it serves to suggest that bullish momentum is propelling CELG stock. As result, I expect higher prices to prevail because the path of least resistance is towards higher prices.

The following Celgene stock chart illustrates the constructive price action that has been in development.

celgene stock chart

Chart courtesy of StockCharts.com

The Celgene price chart is littered with constructive price action. Constructive price action consists of a two-wave structure, and the chart above is a great example of it.

This two-wave structure consists of an impulse wave that serves to advance the stock price, and a consolidation wave that serves to unwind any overbought conditions that were created and, more importantly, set up the next advancing impulse wave. This alternating wave structure creates the necessary building blocks for a sustainable price trend.

The consolidation wave that is highlighted in purple was completed in August 2016, when the price exited the pattern in an upward direction. This exit suggested that a new impulse wave was set to develop.

The initial surge out of the consolidation wave was short-lived, as the price returned to test the consolidation wave from above. This type of price action is referred to as a “backtest.” Such price action is not uncommon, and it serves to reinforce the notion that the exit out of the consolidation wave was legitimate. Since the successful backtest, CELG stock has surpassed the initial surge out of the consolidation wave, suggesting that a new advancing impulse wave is now in development.

The following stock chart illustrates how Celgene stock is currently set up to make an advance.

celg stock chart

Chart courtesy of StockCharts.com

Once again, this price chart is littered with constructive price action, but on a much smaller scale.

CELG stock is now set up in such a way that a close above $127.50 would strongly suggest that another advance is underway. This advance will most likely test the previous all-time high that is currently sitting around the $140.00 mark. A break above that level would open the door to much higher prices.

A price advance is currently being supported by a golden cross that was generated in August 2016. A golden cross is a bullish signal that is produced when the faster 50-day moving average (highlighted in blue on the above chart) crosses above the slower 200-day moving average (highlighted in red). This signal is popular among investors because it is used to confirm that a bull market is in development.

In November 2016, this bullish signal was in danger of averting. An averted golden cross would have generated a death cross. This indicator is the exact opposite of a golden cross, and carries bearish implications. The fact that the death cross came so close to being generated, but was unable to do so, is a testament to the inherent bullish strength within this investment. It takes a lot of buying pressure to avert a signal, especially one that was so close to being generated.

CELG shares are trading above both moving averages that created the golden cross, implying that the bull market is still in development.

Bottom Line on Celgene Stock

I am bullish on Celgene stock because there are indications on the company’s price chart that continue to suggest that higher prices are the path of least resistance. I will remain bullish on CELG stock until there are indications on the price chart that suggest another view is warranted.