GILD Stock: The Competition Has a Leg Up
There is nothing that can quite describe the feeling of doing fundamental due diligence on an investment, weighing its merits, and finally pulling the trigger only to have zero returns as a result. The disappointment is compounded when markets are making headway and making new all-time highs. This is my feeling toward Gilead Sciences, Inc. (NASDAQ:GILD) stock.
The company is trading at $81.66 and is sitting at the lower end of a trading range, down 18% on the year. The fundamentals argue for higher prices, but GILD stock price has yet to confirm this premise. So instead of dwelling on this position, with the assumption that there is always a bull market somewhere, perhaps attention is warranted elsewhere.
Repligen Corporation (NASDAQ:RGEN) stock is a direct competitor in the biotechnology space, and it only has a market cap of $1.0 billion. This represents only a fraction of Gilead stock’s market cap of $107.0 billion. Right off the bat, the lower market cap places RGEN stock in the small-cap space.
More Upside for This Biotech Stock?
Small-cap stocks are known to outperform their large-cap counterparts when the sector as a whole is in a bull market. I always look for companies to have upside potential when screening for an investment. My view is subjective, but I believe that RGEN stock has a better chance of multifold returns because their market cap allows such growth. Gilead stock could possibly accomplish this feat, but then their market cap would be amongst the largest in the world.
I have yet to enter an investment without first discerning the trend that can be found using a stock chart. See what the following chart illustrates.
Chart courtesy of StockCharts.com
A downtrend in RGEN stock began in July 2015; the trend line is created by connecting the peaks on the price trend. While the price is below the trend line, the investment is seen in a negative light, alluding to a bear market. The trend is clear and defined, and the pattern progresses from the upper left to the lower right. There should be little confusion between an uptrend and a downtrend. A trend reversal is made apparent when the price trades—and closes—above the trend line.
On June 29, RGEN stock closed above the downtrend line and signalled that the trend was broken and that the pattern of lower prices has ceased. This was the first signal that a bullish bias was building.
On August 1, RGEN stock confirmed a “double bottom.” A double bottom is a reversal pattern that appears at the end of a downtrend. Its key features are two consecutive bottoms that are separated by one peak in between. The pattern is executed when shares close above the peak that separates the two bottoms. This pattern is significant and should never be ignored, as it signals that a trend reversal is in play.
If that were not enough, another signal has just given its stamp of approval, and that signal is visible on the following chart.
Chart courtesy of StockCharts.com
Moving-average crosses are lagging-but-confirming indicators. Trend traders use this signal to reaffirm their trading bias. There are two possible signals that can generate: a “golden cross” or a “death cross.”
In February 2012, RGEN stock generated a golden cross, which is a bullish signal that is produced when the faster-moving 50-day moving average crosses above the slower 200-day moving average. The signal remains in effect until the moving averages cross again, at which point a death cross is generated. A death cross is the exact opposite of a golden cross and signals that a bear market is on the horizon. Using this signal as a tool to remain long until an opposite signal was generated would have netted an outstanding return of 650%.
As of August 17, a new golden cross has been generated and supports the previous two bullish signals that I outlined, and acts like a final seal of approval.
The Next GILD Stock? Maybe.
Fundamentals are important to valuing an investment like GILD stock, but waiting for an investment to trend in your direction may take a long time, and sometimes never develops. Gilead stock is not the only notable investment in the biotech space; other companies with compelling valuations and better charts are available. RGEN stock is such an investment, and it fits the criteria I look for when searching for applicable stocks.
RGEN stock is just one of many. If the healthcare sector is an appealing space, I suggest you take a serious look at the report just released by our top tech editor. I was really surprised at what I had learned. Click HERE for the full report: “This Device to Slash Your Health Insurance Bills by up to 74%?”