REGN Stock: When Bad News Is Good News
The cross-hairs are pointed directly at the biotechnology sector, as the Donald Trump administration is set to announce its policies on how it will deal with the predatory pricing polices that have tarnished the face of this industry. I have the inclination to believe that this potentially damning news will put a bid towards this sector, and Regeneron Pharmaceuticals Inc (NASDAQ:REGN) stock. REGN stock is perfectly set up to take advantage of any bullish tailwinds that are created from this news, because Regeneron stock has generated a number of bullish indications that are already suggesting that the path of least resistance is geared towards higher prices.
You might be wondering how such damning news could be seen in a bullish light, but it is actually quite simple. This could possibly turn out to be the classic “sell on rumor, buy on news” event that will cause savvy smart money short sellers to finally cover their bearish positions. In order to cover their positions, they need to buy the positions back, and this creates a bid for this sector. This idea is being reinforced by a number of indications on the iShares NASDAQ Biotechnology Index (ETF) stock chart that are in bullish alignment, waiting for a catalyst to set the wheels in motion.
The pieces started falling together in February of this year, when a golden cross was generated. This indication was created when the 50-day moving average crossed above the 200-day moving average. This indication illustrates that the average price over the last 50 days is higher than the average price over the last 200 days, indicating that the near-term trend is accelerating versus the long-term trend. This is indicative of a stock that is trending higher, and this is the reason why this tool is used to confirm that a bull market is in development.
The following IBB stock chart illustrates how the indications are in bullish alignment, awaiting a catalyst.
Chart courtesy of StockCharts.com
Shortly after this indication was generated, a technical price pattern known as a “pennant” began to develop. This price pattern contains two converging trend lines that represent levels of support and resistance. The next move in this sector is dependent on the direction in which this ETF breaks out of this price pattern.
While the pennant was in development, the 200-day moving average was tested successfully. Using this moving average as a tool is quite simple. If the investment is trading above this moving average, it is deemed bullish, while an investment trading below it is deemed bearish. Simply put, this moving average acts as a dividing line separating bullish and bearish investments. Testing this moving average from above, and maintaining a position above it, only serves to reinforce this bullish indication suggested by the golden cross.
The golden cross remains in bullish alignment, so this increase the odds that this pattern will resolve itself in a bullish manner by breaking above resistance.
A bullish resolution of the pennant will reinforce the following indicator on the Regeneron stock chart that is already suggesting that this investment is all set to make an advance.
Chart courtesy of StockCharts.com
The main indication that has my attention is the moving average convergence/divergence indicator. This indicator, which is better known by its acronym “MACD,” is used to distinguish between bullish and bearish momentum.
This momentum indicator captures which camp is control, and this indicates which direction the stock is geared in.
In September 2010, a bullish cross was generated, indicating that bullish momentum had overwhelmed the trading action in REGN stock. This momentum drove the Regeneron stock price from $25.00 to $450.00, representing a 1700% return over in a little over five years before a bearish cross negated this indication.
This bearish cross occurred in January 2016, indicating that bearish momentum had gained the upper hand, correctly suggesting that the advance that began in 2009 had finally concluded. It put a cap on any further gains in Regeneron stock.
These two instances of MACD crosses are a testament to the weight that this indication possesses, and this is why I do not take this indication lightly.
A bullish cross was just generated in May of this year and it is one of the main reasons why I believe that Regeneron stock is in bullish alignment, waiting for a catalyst to send it higher. The price action on the REGN stock chart supports this view because a bullish MACD cross supports the generation of an impulse wave.
An impulse wave is part of a two-wave structure that is a necessary ingredient within a long-term trend. The first wave, an impulse wave, defines the stage where an investment makes a linear advance. The second wave is a consolidation wave, and it defines the stage that serves to unwind any overbought conditions that were created in order to create the necessary environment for a new impulse wave to develop.
Impulse waves are highly correlated with bullish MACD crosses because impulse waves require bullish momentum to drive the share price higher. The MACD indicator is in bullish alignment, and in order to confirm that an impulse wave is in development, the consolidation wave needs to be completed. In order to confirm this indication, REGN stock needs to close above $605.93, at which point I will be incredibly bullish on the prospects of this investment heading forward.
Bottom Line on Regeneron Stock
Regeneron stock is in bullish alignment, ready to stage an advance, but it is missing a required catalyst. I believe that the damning news surrounding this sector will put a bid towards the biotechnology stock that will finally provide the catalyst needed to send REGN stock surging higher.