CELG Stock: Unleash The Bull
Donald Trump is set to be president of the United States, and the market was expecting a massive sell-off. That seems to be ill-advised at this moment, however, as the indices pare their overnight losses.
One thing that is certain is that the “sell on rumor, buy on news” strategy surrounding the biotech sector is playing out perfectly. Celgene Corporation (NASDAQ:CELG) stock is just one the stocks in the biotech sector that is soaring today.
The pharmaceutical sector was focused on by both presidential candidates, but it was Hillary Clinton’s tweet On September 21, 2015 that really set the spotlight on this sector as she vowed to curb price gouging and go after pharmaceutical offenders.
Investors are bidding up biotech stocks on the Trump win because they believe he wont be stringent in coming after these kinds of companies, and he won’t curb their pricing strategies. The technical setup going into the election was impeccable, and it is acting like a perfect tailwind to propel Celgene stock higher.
The following Celgene stock chart illustrates the setup pattern that developed going into the election.
Chart courtesy of StockCharts.com
CELG stock spent approximately 12 months putting in a technical pattern known as a symmetrical triangle. A symmetrical triangle, by definition, is a consolidation pattern that contains two converging trend lines. One line represents resistance and the other represents support. Traders refer to triangles as a zone of indecision, as the prior move is digested. These patterns are particularly explosive because, as the pattern progresses, momentum gathers speed similar to a spiral pattern.
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Descending triangle patterns often have five points of contact before the pattern breaks in either an upward or downward direction. CELG stock completed these five points of contact and broke out In July 2016, and the initial target based on this pattern is where the triangle began at $140.00.
The stock price had yet to follow through on this bullish development, as CELG stock has spent the months preceding the presidential election backtesting the trend line that served as resistance for the triangle pattern.
The election is serving as the catalyst to send Celgene stock soaring, and the following chart illustrates the setup going into the election.
Chart courtesy of StockCharts.com
Following the breakout of the descending triangle, CELG stock failed to follow through and the price was contained by the resistance line that is highlighted in blue on the chart above. The trend line only acted to contain the price further as bullish pressure continued to mount.
This bullish pressure can be seen as a golden cross was generated in August. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market in Celgene stock is on the horizon.
This bullish pressure finally gave way a day prior to the election as the “sell on rumor, buy on news” traders started to cover their positions early. A close above $118.00 would set in motion the requirements needed for CELG stock to attain its initial price target of $140.00.
The Bottom Line on Celgene stock
The market is interpreting the Donald trump victory as a bullish indicator for Celgene stock and the entire biotech sector. Clinton seemed to the candidate investors feared most, and with her out of the way, CELG stock can now move higher.