These Indications Support Higher Biogen Stock Prices

biogen stock
credits:istock.com/cofotoisme

BIIB Stock Is Primed for Higher Prices

The markets are absolutely on fire and the indices are consistently forging new highs. The biotechnology sector has been lagging behind the major market indices because this sector has yet to move beyond its highs set in 2015. As of late, this sector has begun to move higher. As a result, I have been looking for compelling investments in this space, stocks that are ready to play catch-up.

This is why I am focusing on Biogen Inc (NASDAQ: BIIB) stock; I have reason to believe that higher prices are on the horizon. Aside from it just being a biotechnology stock, my beliefs are based on a number of technical indications pulled from the stock chart, which are suggesting that higher Biogen stock prices are likely.

These indications are centered around a technical price pattern that was created around a significant level of price resistance and a very influential momentum indicator.

The following stock chart illustrates the technical price pattern currently suggesting that higher BIIB stock prices are likely.

biogen stock chart

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the stock chart is a cup and handle pattern.

This pattern was created because a significant level of price resistance, which resides at $300.00, prevented the BIIB stock price from moving beyond it. This resulted in the creation of two distinct troughs, where the first trough is much larger than the second. These troughs define the cup and handle price pattern.

This pattern was completed on August 30, when the stock price was finally able to gather enough strength to move beyond it. The completion of this pattern suggested that higher prices are on the horizon. Not only that, but it also provided a price objective for the potential move toward higher prices.

Also ReadBiotech Stocks: List of Top 10 Biotech Companies to Watch in 2017

This price objective is obtained using a method called a measured move. It involves taking the depth of the cup and extrapolating that value above the level of resistance that defined this pattern. The measured move suggests that $390.00 is a potential price objective.

This objective is still in play as long as BIIB stock remains above the level of price resistance that completed the cup and handle pattern. This level of resistance has now become a significant level of price support, creating a floor for the share price.

The bullish implications suggested by the completed technical price pattern are in line with indications suggested by the influential momentum indicator highlighted on the following Biogen stock chart.

biib stock chart

Chart courtesy of StockCharts.com

This influential momentum indicator, known as the moving average convergence/divergence (MACD) indicator, is found in the lower panel of the BIIB stock chart.

The MACD indicator uses the crossing of a signal line in order to indicate whether bullish or bearish momentum is influencing the price action in a stock. This indication is both significant and important information because, in order to sustain a move to either higher or lower stock prices, the applicable momentum is required.

For instance, the last time a bullish MACD cross was generated near the zero line was in February 2010. This indication suggested that bullish momentum was influencing the price action in the stock, paving the road toward higher prices. While this bullish indication was engaged, Biogen stock appreciated to the tune of 553.33%, before a bearish cross was generated.

This bearish MACD cross put a cap on further gains and a substantial sell-off followed. This is why I do not take the implications suggested by this indicator lightly. Ever since a bullish MACD cross was generated in June of this year, I have been expecting the development of a move toward higher stock prices.

The combination of the bullish MACD indicator and the completed cup and handle price pattern have created the pieces I seek in order to suggest that Biogen stock is primed for higher prices.

Analyst Take:

I am bullish on Biogen stock because a number of technical indications on the company’s stock chart suggest that BIIB stock is currently geared towards higher prices. I will continue to maintain this view until there are indications on the company’s stock chart that suggest this view is no longer warranted.