REGN Stock: Bullish Biotechs
Donald Trump’s election victory sent biotech stocks screaming higher as the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB), which acts as a proxy for this sector, was up 7.44% on Wednesday morning.
This reaction to the election is a classic example of “sell on the rumor, buy on the news” and as a result, this bullish news sent Regeneron Pharmaceuticals Inc (NASDAQ:REGN) stock up 10.78%.
Hillary Clinton vowed as a presidential candidate that she would crack down on the pharmaceutical price gouging that has angered many Americans, as their drug costs continue to increase at an alarming rate. Trump had also campaigned against this practice, but it seems that investors were more concerned that Clinton would have followed through on her threats.
It was Clinton’s tweet on September 21, 2015, that sent the sector lower, so how fitting is it that her demise at the hands of Trump is what sent the sector soaring.
The following IBB stock chart illustrates the trend that has pressured the biotech sector.
Chart courtesy of StockCharts.com
Clinton’s tweet was instrumental in turning a small correction in the biotech sector into a prolonged downtrend. This downtrend had dominated IBB stock since July 2015, and is highlighted in blue on the chart above. The trend line is created by connecting the peaks on the price chart. It is defined by lower lows and confirmed by lower highs. It can easily be identified as the price moves from the upper left to the lower right, and is a clear example of bearish price action.
Bullish tailwinds first started to prevail in July 2016. My excitement began when IBB stock finally broke above the downtrend line. This indicated that the pattern of lower highs and lower lows had ceased. In theory, this action suggested an end to the bear market.
The price failed to follow through on the breakout as the price returned to backtest the resistance line. I can only interpret this price action as the market was setting up for a victor, and the stock charts were setting up to move on the news.
The following Regeneron stock chart illustrates the position where the price currently sits.
Chart courtesy of StockCharts.com
Regeneron stock began to generate bullish tailwinds in September when REGN stock produced a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). This signal is used to determine which camp has gained the upper hand, and a bullish cross indicates that the bulls are now in control of REGN stock.
REGN stock gapped up this morning, and is currently trading just below resistance. Any bullish case would require Regeneron stock to trade above this level of resistance. Higher prices are also needed in order to avert a potential bearish signal as the moving averages are in danger of producing a death cross, which is the exact opposite of a golden cross.
If this level of resistance is broken and a death cross can be averted, I would expect REGN stock to surge higher. A price breakout and an averted signal will act to accelerate the current trend. This move would be made possible if REGN stock can close above the resistance line on a weekly basis.
The Bottom Line on Regeneron Stock
The biotech sector is surging on the news that Donald Trump is going to be the next president of the United States, as investors feared Hillary Clinton’s stance toward this sector. If Regeneron stock can close above resistance on a weekly basis, this will constitute the essential ingredients that I presume will be needed to send REGN stock soaring further.