Celgene Corporation: CELG Stock Chart Setting Up for a Spike

CELG Stock Chart asticCELG Stock: Chart-astic!

I have found that it is always best to focus on investments that abide by technical rules and to try to avoid those that do not. Celgene Corporation (NASDAQ:CELG) stock is one of those investments that abides to technical indicators and patterns to such a degree that it is always wise to pay attention when any such signal is given.

For those not familiar with my style of investment analysis, I use technical analysis on which to base my investment views. This style of investment analysis is based on using past price and volume data to discern trends and forecast future prices. I have been using this method to create investment strategies for north of a decade, and I have enjoyed some success in doing so.

The CELG stock chart is a work of art, and the progression from the different time frames illustrates how well this investment abides by technical patterns and rules.

The following Celgene stock chart illustrates the long-term price trend.


Chart courtesy of StockCharts.com

An uptrend line has defined the entire bull market move in Celgene stock that began in 2002. This trend line is created by connecting the troughs on the price chart. This trend begins in the lower left of the price chart and moves progressively to the upper right. This is the type of price action I wish every investment in my retirement account contained.

This uptrend line is the line in the sand for CELG stock and, as long as it is trading above it, bullish price action is to be expected.

Celgene stock has not tested this uptrend line on many occasions but, when it has, CELG stock has bounced off it each and every time. The current test of this trend line was very constructive.

The following Celgene stock chart illustrates the constructive pattern that developed as this uptrend was being tested.


Chart courtesy of StockCharts.com

The stock chart above illustrates the healthy and constructive price action as CELG stock was testing the long-term uptrend line. Healthy and constructive price action constitutes impulse waves that take the price to a new high, and a consolidation wave that alleviates any overbought conditions and sets up the next impulse wave.

The consolidation wave developed in the form of a triangle pattern. This pattern contains two converging trend lines. One line represents resistance and the other represents support. The price will oscillate between support and resistance until the pattern is finally completed when the price breaks above or below the trend lines.

Celgene stock broke out in July 2016, but this breakout lacked any follow-though. The price returned to backtest the triangle from above. Such price action is not uncommon, but what makes this instance special is that this backtest also served to touch support outlined by the uptrend line that serves as the long-term trend.

The price spike that followed was no surprise, as such reactions can be expected when major levels of support are being tested.

The following CELG stock chart illustrates the pattern that followed the price spike.


Chart courtesy of StockCharts.com

The price surge off of the uptrend line has also been constructive, and a similar type of impulse wave and consolidation wave have developed. The overbought condition created by the impulse wave is being unwound, and a new bullish signal could be produced in the coming days if the price can close above resistance highlighted in purple.

A close above this trend line would also coincide with a bullish moving average convergence/divergence (MACD) cross. MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. A bullish signal would indicate that bullish tailwinds were once again swirling, and that a price advance could be expected as bullish momentum is once again outpacing bearish momentum.

These coinciding factors could lead to another spike in price.

Bottom Line on Celgene Stock

I am bullish on Celgene stock because it abides by technical indicators and patterns, and the price action suggests that such a view is warranted. As long as CELG stock continues to act constructive and the price action remains bullish, my views will match the price action.