BMY Stock: All of Sudden, Upside Is Expected
All of sudden, a rally has engulfed the pharmaceutical sector. Bids are racking up and they are driving up individual names. This push has done a number on Bristol-Myers Squibb Co (NYSE:BMY) and the Bristol Myers stock chart, where a number of indications are suggesting that BMY stock is now set to make an advance.
This is a complete 180-degree turn because there was a shadow cast on this sector that caused these investments to underperform. The indications I just mentioned are suggesting that this underperformance is set to be a thing of the past, implying that a bullish view on Bristol Myers stock and this sector is warranted.
I am speculating that the shadow that was cast on this sector was a result of the uproar surrounding the predatory pricing policies some of these companies were using. This uproar began in September 2015, following a Hilary Clinton tweet, where she vowed to curb the predatory pricing polices a select group of pharmaceutical companies was using to pad their bottom lines.
In January 2016, Donald Trump added fuel to this rhetoric by stating that he too would instill government policies to curb there actions. From that point on, the equity markets continued to rally, but the pharmaceutical sector lagged and underperformed by a considerable amount.
In the coming weeks, the Trump administration is going to announce its legislation that will act curb these actions, and put a stop to predatory pricing policies. Although this is damning news for the sector and select number of companies, we as investors will be able to quantify the damage created and there will no longer be any lingering doubts.
Such an event will conclude the “sell on rumor, buy on news” adage, which will finally lift the shadow that was cast on this sector. Investors are already front-running the news on this legislation, and it has caused a rally to ensue prior to the dissemination of the news.
As I mentioned earlier, the sector-wide buying pressure has caused a number of indications on the following Bristol Myers stock chart to suggest that an advance is now set to take place.
Chart courtesy of StockCharts.com
BMY stock has staged an advance that generated a golden cross, which coincided with a break above resistance. Indications that coincide with one another reinforce the signal that is being generated.
Also Read: Bears Will Continue to Ravage BMY Stock
A golden cross is a bullish indicator that is used by investors to suggest that a bull market is in development. This indication is created when the faster 50-day moving average, which is highlighted in blue, crosses above the slower 200-day moving average, which is highlighted in red. This indicator implies that the current trend is accelerating versus the long-term average, suggesting that momentum is picking up.
The generation of the golden cross acted to reverse the death cross that was generated in September 2016. This indication created a bearish headwind, and a bearish trend quickly developed. This trend contained a series of lower highs and lower lows, which as we know, is the quintessential characteristic that defines a bearish trend.
Price resistance defined by this bearish trend is highlighted by a purple trend line. This trend line was created by simply connecting the peaks that followed. This trend line stopped BMY stock from advancing beyond it on numerous occasions. While this bearish trend was in development, the moving averages that created the death cross remained in bearish alignment. That indication began to weaken as the moving averages began to converge.
From mid-May, the 50-day and 200-day moving averages completely converged and were trading as one, indicating that volatility had completely contracted. Contraction of volatility happens prior to a major move. It’s what I refer to as the calm before the storm.
The break above the trend line suggests that the stock price is now set to move higher, and it is also responsible for the separation of the moving averages, creating the golden cross. These two indications strongly suggest that a bullish storm is now taking place.
In August, Bristol Myers stock gapped lower following a failed a drug study. That gap remains open till this day. I am inclined to believe that the newly generated indications are supporting the notion that, at minimum, the gap is likely to get filled. This notion suggests that BMY stock is set to hit $73.27, which represents a 29.36% increase from current prices.
Bottom Line on Bristol Myers Stock
The entire pharmaceutical sector is moving, and it has created a sufficient tailwind such that bullish indications have been generated on the Bristol Myers stock chart. These indications suggest that an advance is now in development, and, as a result, I expect higher BMY stock price to follow. My bullish view is predicated on the indications that have been generated on the stock chart. Therefore, my view remains contingent on these indications remaining in bullish alignment.