KITE Stock: A Monster Move in the Making
The bull market in equities is missing a key player, and that player is the biotechnology sector. I have reason to believe that this lagging sector is now on pace to make a comeback, and it is one of the reasons why I am currently focusing on Kite Pharma Inc (NASDAQ:KITE) stock. The main reason is that Kite Pharma stock just forged a 52-week high, which is also a new all-time high.
In order to accomplish this feat, Kite stock had to break above a significant level of price resistance. Breaking above this price level carries implications that are worth getting excited about. My excitement is compounded because the breakout on the KITE price chart is coinciding with a breakout in the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), which is suggesting that the entire sector is ready to make a move.
When a stock breaks out, it’s one thing. But if the entire sector is breaking out at the same time, the implications are magnified because it creates a rising tide, and a rising tide raises all boats. This rising tide creates a bullish tailwind that will push the entire sector higher. This dynamic offers an incredible opportunity in a compelling investment.
The following Kite Pharma stock chart illustrates the breakout above resistance that has me so enamored and excited about the prospects of this investment.
Chart courtesy of StockCharts.com
The price chart clearly shows that, on June 20, KITE stock broke above a key level of price resistance at $90.00. Prior to this, that level of price resistance acted to refute KITE stock’s every attempt to break above it since January 2015, when this level of resistance was first established.
This level of price resistance stood for 2.5 years before it was finally broken. In doing so, KITE stock completed a very large wave structure that is suggesting that higher prices are now on the horizon.
The breakout that is highlighted on the price chart suggests that the consolidation wave that was in development for 2.5 years is complete, and that a new advancing impulse wave is now in development. Kite Pharma stock contains no overhead price resistance because it is trading at a new all-time high and, therefore has plenty of upside potential. This potential is fueled by investors chasing momentum and short sellers who need to cover their respective bearish positions.
From a tactical point, this is a great time to apply an investment strategy because risk is defined using the level of price resistance that was just broken. This truth is magnified because breaking above resistance has set a number of price objectives into play.
Using the wave structure creates one objective, while using the pattern that defined the consolidation wave creates the other. Without going into too much detail, the preliminary price objectives based on this breakout are $115.00 and $140.00, but these levels may prove to be too conservative if the price action continues to support the notion of higher prices.
The bullish view on Kite Pharma stock is being reinforced by the breakout that coincided on the IBB ETF stock chart below.
Chart courtesy of StockCharts.com
The biotechnology sector surged on the same day that KITE stock made a new all-time high, and this ETF is now trading at the highest level of the year. This is quite a feat, considering the negative stigma that surrounds this sector.
There was evidence that this sector was transitioning into a bull market after a golden cross was generated in February. A golden cross is a bullish indication that is generated when the faster 50-day moving average crosses above the slower 200-day moving average. This indicator identifies when movement is picked up, suggesting that the investment is trending in the upward direction. Simply put, this indication suggests that a bull market is in development.
In March, a pennant price pattern began to form. This pattern is best identified using two converging trend lines, where one trend line defines support, and the other defines resistance. Patterns such as this one set up the next move. The move is identified when the stock price breaks above resistance or below support. The break above resistance suggests that an advancing move in this ETF is now underway, and the implications are bullish because it suggests broad-based participation.
For investments like KITE stock, broad-based participation will add fuel to its projected move and, therefore, I would not be surprised to see a fairly large run-up in a short amount of time.
Bottom Line on Kite Pharma Stock
Kite Pharma stock is breaking out to the upside, and this is coinciding with a breakout in the IBB ETF. The bullish picture painted on the KITE stock chart is being reinforced and magnified by the implications suggested by the IBB ETF stock chart. These coinciding indications suggest that there is quite a bit of fuel behind the bullish move that is now expected.