CELG Stock: Impulse Wave in Development
On June 12, I published a report on Celgene Corporation (NASDAQ:CELG) stock titled, “Celgene Stock Has Now Reached That Moment of Truth,” where I outlined a number of key developments that were suggesting that an imminent move was in the making. That moment of truth is now upon us, because Celgene stock maintained a very key level of price support, and then proceeded to break above a key level of price resistance. This development is bullish to say the least, and it serves to suggest that higher CELG stock prices are now in development.
This bullish view is being support by a broad-based breakout in the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB). This breakout in IBB stock indicates that a sector-wide rally is now in development, and this magnifies the great news already suggested by the CELG stock chart.
The biotechnology sector has not participated in the market advance because a dark shadow was cast on this sector after both presidential incumbents vowed to curb the predatory pricing policies that drug makers were using to boost their bottom lines.
The new Republican administration is adamant on setting a cap on these policies, and a new drug pricing policy is set to be announced in the coming weeks. This news, albeit potentially damning, will finally lift the shadow that has been cast on this sector. Investors will be able to quantify the repercussions of this new policy, leaving this sector standing on its own merits.
The following IBB stock chart illustrates the recent developments that are suggesting that biotechnology stocks are transitioning into a bull market.
Chart courtesy of StockCharts.com
The Nasdaq index continues to forge new highs, and I have yet to see a broad-based market rally in the Nasdaq index where the biotech sector was not a participant. This is the reason why I have been looking for indications that this sector was set to join in on all the fun.
My inclination towards an advance first came about in February 2017, when the IBB stock ETF generated a golden cross. This bullish indicator is highlighted on the chart above, and it is generated when the 50-day moving average, highlighted in blue, crosses above the 200-day moving average, highlighted in red.
In essence, this indicator outlines the point where short-term momentum begins outpacing the long-term average. This indication suggests that a move to the upside has begun, and it is why this indication is used to suggest that a bull market is in development.
Following the golden cross, a pennant formed, and this technical price pattern is also highlighted on the price chart. This pattern is created using two simple converging trend lines, where the upper trend line represents resistance and the lower trend line represents support. A pennant is a setup pattern that will determine whether the sock is set to advance or decline. A direction will be implied when the ETF breaks above resistance or below support.
On June 19, resistance outlined by the pennant was broken, and a sharp rally quickly ensued. This event is marked as a breakout on the price chart, and it carries bullish implications suggesting that this investment is now geared towards higher prices.
The bullish indications implied by the IBB ETF stock chart are in perfect alignment with the following indications on the Celgene stock chart.
Chart courtesy of StockCharts.com
This CELG stock chart outlines the constructive price action that has been in development since July of last year.
Constructive price actions consists of an alternating wave structure made up of impulse waves and consolidation waves. An impulse wave defines the progressive movement towards higher prices, and the consolidation wave defines the backing and filling that is required to create the necessary conditions for a new impulse wave to develop. This bullish wave structure is commonly found in investments that contain a predominantly bullish trend.
The constructive price action on the Celgene stock chart began in June of last year with an impulse wave. The wave structure has been alternating ever since, implying that a bullish trend is underway.
The consolidation wave that was in development was just resolved to the upside. I had inclinations to believe that such a feat would occur because the 200-day moving average was tested successfully in late May while this consolidation wave was still in development. The 200-day moving average is the dividing line between bullish and bearish investments, and as long as CELG stock is trading above it, my view on Celgene stock will remain tilted towards a bullish outcome.
The completed consolidation wave is suggesting that a new impulse wave is now in development. These bullish implications coincide with the bullish implications on the IBB stock chart, suggesting that there is quite a bit of fuel behind this move. I would not be surprised to see Celgene stock shoot higher in short order as a result.
Bottom Line on Celgene Stock
The biotech sector is finally staging an advance, and this creates a tailwind that will help propel Celgene stock higher. This bullish view is being suggested by technical indications on both the CELG stock chart as well as the IBB stock chart. As a result, I will continue to hold a bullish view, until there are indications that suggest that another view is warranted.