Celgene Stock Chart Continues to Suggest Much Higher Prices
CELG Stock Is Up, Up, and Away
The biotechnology sector has lagged the general market, and this lag is due to the negative stigma that has blanketed this sector as predatory pricing polices have become a serious concern. These concerns have been expressed in political circles, and even Donald Trump has vowed to curb these predatory pricing policies.
This lag in performance is occurring within a bullish backdrop for equities, as new records are being forged on a daily basis. There is growing evidence that the biotech sector is now turning to play catch-up, and if I were to pick my favorite play in this space, I would have to lean toward Celgene Corporation (NASDAQ:CELG) stock.
My reasons for singling out Celgene stock is actually quite simple: I am enamored with the price chart, and it conveys a message indicating that higher prices are likely.
I have been using price charts as the basis of my investment views for nearly two decades, and I have found a great deal of success doing so. The key to this success is to understand that a multitude of signals, on multiple time frames, need to convey the same message in order to generate and confirm an investment view.
The following monthly chart illustrates the long-term bullish trend in CELG stock.
Chart courtesy of StockCharts.com
The incredible bullish run in Celgene shares that began in 2002, is best defined by using a simple uptrend line. This simple uptrend line is created by connecting the valleys on the Celgene stock chart. This trend line illustrates a trend that progressively traveled over time from the lower left of the price chart to the upper right.
The magnitude of this trend line is so important that it now serves to define whether CELG stock is trading within a bull market or not. This is simply conveyed by the following statement: trading above the trend line is bullish, and trading below it is bearish.
Celgene has just completed testing this trend line and while it has maintained its stature above it, a bullish moving average convergence/divergence (MACD) cross was generated.
MACD is a simple and effective trend-following momentum indicator that uses signal-line crosses to distinguish between bearish and bullish momentum. A bullish cross suggests that bullish momentum is propelling the price of CELG stock and, as result, I can expect that the path of least resistance is geared toward higher prices.
The following weekly chart illustrates the price action that supports the views suggested by the MACD indicator.
Chart courtesy of StockCharts.com
The price chart above is a perfect illustration of constructive price action. Constructive price action contains impulse waves that serve to advance the price and consolidation waves that serve to alleviates overbought conditions and set up the next advancing impulse wave. This alternating wave structure allows a trend to remain sustainable.
This wave structure is especially constructive because not only does it discern the next direction in the price, it also provides a potential price objective. In July 2016, Celgene exited the pattern in a upward direction indicating that the next direction in the price was higher and, at the same time it produced a price objective of $160.00, which was obtained by mirroring the length of the initial impulse wave.
The initial move out of the consolidation pattern lacked any follow-though, and the price returned to test the pattern from above. This price action is referred to as a “backtest,” and serves to reinforce the notion that the exit out of the consolidation pattern was legitimate. This type of price action is not uncommon, but what makes this instance special is that this “backtest” also served to test support outlined by the uptrend line illustrated on the previous chart.
The following daily chart illustrates similar price action that is further supported by mounting bullish indicators.
Chart courtesy of StockCharts.com
The price chart above illustrates that similar constructive price action is present on the daily chart. This constructive price action is supported by a golden cross that was generated in August 2016.
A golden cross is a bullish signal that is produced when the faster 50-day moving average (highlighted in blue) crosses above the slower 200-day moving average (highlighted in red). This signal is popular among the trading community because it is used to confirm that a bull market has commenced.
This indicator was in jeopardy of producing a death cross in November 2016. A death cross is the exact opposite of a golden cross, and suggests bearish implications. It takes a lot of buying pressure to avert a signal, and this indicates that there is a lot of inherent bullish strength that is contained within this investment.
A consolidation wave just completed a few weeks ago, via a price breakout. This price action indicates that a new impulse wave is now in development, and that higher prices are likely.
Bottom Line on Celgene Stock
I am bullish on Celgene stock because the monthly, weekly, and daily time frames all coincide, and continue to suggest that bullish tailwinds are driving this investment. As long as these indications remain bullish I will continue to believe that higher CELG stock prices are likely.
