Biogen Stock Is Perfectly Aligned to Stage a Bullish Advance

Biogen Stock
Credit:iStock.com/champc

BIIB Stock Exhibiting Bullish Tendencies

My admiration for biotechnology stocks should be no surprise because I have been focusing on a number of companies within this space. This sector has once again whetted the appetite of investors, and as result, it is currently outperforming its peers. I am returning to focus on another biotechnology stock, Biogen Inc (NASDAQ: BIIB) stock, because I have reason to believe that this renewed admiration for biotechnology stocks will create a rising tide that will help propel the stock higher.

The rising tide is not the actual catalyst that is creating my bullish view on BIIB, it is only reinforcing it. My bullish beliefs that higher Biogen stock prices are on the horizon are based on the indications that I was able to garner using the company’s stock chart. This method of investment analysis is known as technical analysis and it is based on the notion that historical data points can be used as a looking glass to project what the future may bring. This may sound like a far-fetched idea, but I have known first-hand that when this method of analysis is applied correctly, the results are breathtaking.

My bullish inclination towards this investment was initiated by a simple momentum indicator, which is illustrated on the following stock chart.

biogen stock chart

Chart courtesy of StockCharts.com

The very influential momentum indicator I have been referring to is located in the lower panel of the above Biogen stock chart, and it is labeled “MACD.” MACD is an abbreviation for moving average convergence/divergence, and this indicator is used to distinguish whether bullish or bearish momentum is influencing the trading action.

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In order to sustain a move towards higher or lower prices, the required momentum is needed, and when an indication is generated, I take the implications seriously. It was this indication that first spawned my bullish inclination towards this stock.

For example, in February 2010, a bullish MACD cross was generated. This bullish signal was indicating that bullish momentum was influencing the trading action on Biogen stock. The bullish momentum created a path of least resistance that was geared towards higher stock prices and the fact that it appreciated by 553.33% while this indication was in bullish alignment is a testament to its significance.

The same can be said about the bearish MACD cross that was generated in June 2015. This bearish signal effectively confirmed that the stock price was set to correct and lower prices did indeed prevail.

In June of this year, my bullish inclination towards BIIB stock was spawned when a bullish MACD cross was generated. This indication suggests that bullish momentum is once again influencing the stock, and therefore higher stock prices are on the horizon.

The bullish MACD cross was influential in suggesting that the pattern on the following stock chart was set to be completed.

BIIB stock chart

Chart courtesy of StockCharts.com

The technical price pattern highlighted on this stock chart is a “cup and handle” pattern.

This technical price pattern is the result of a significant level of price resistance that prevented the stock price from advancing. This inability to advance created two distinct troughs, where the first trough was much larger than the second. These troughs painted a picture on the price chart that resembles the infamous tea cup.

This significant level of price resistance first showed its face in July 2015, following a disappointing earnings announcement. Investors reacted by sending Biogen shares sharply lower, which left a sizable price gap on the BIIB stock chart. This marked the beginning of the significant level of price resistance which stood at $300.00.

On August 30, BIIB closed above this level of resistance, indicating that the cup and handle price pattern was complete. The completed pattern suggested that higher stock prices were expected to follow. After an initial surge higher, the stock price returned to test this level from above. This price action is called a backtest, and it serves to reinforce that the break above resistance was legitimate, while simultaneously establishing it as a new level of price support.

Analyst Take: 

The MACD indicator and the technical price pattern support the notion that higher BIIB stock prices are on the horizon. Add in the fact that a broad-based rally is occurring in this sector and the perfect ingredients have been provided to create and sustain a move towards higher stock prices.