REGN Stock: This Bear Is Fierce
2016 was a disappointing year for REGN stock, and 2017 is not faring any better as it is off to a poor start. On Thursday January 5, a U.S Federal judge ruled that Regeneron Pharmaceuticals Inc (NASDAQ:REGN) and Sanofi SA (ADR)(NYSE:SNY) have infringed on a patent held by Amgen, Inc. (NASDAQ:AMGN). The resulting fallout from this news sent REGN stock plunging 5.84% on Friday.
This decision means that Sanofi and Regeneron will be banned from selling their cholesterol drug “Praluent” in the United States. This injunction goes into effect in 30 days. This decision will most likely be appealed, but regardless of a positive outcome, this still creates a big expensive mess.
This is just another addition to the list of negatives that has plagued REGN stock. After Regeneron stock peaked at $605.93 in August 2015, the stock began to trend lower and every time REGN stock looked like it had taken a step forward, it followed it up by taking two steps backwards. This negative price action is why I have little choice but to be bearish on REGN stock, and the price chart is pointing toward further losses.
The following stock chart illustrates the grip that the bears have on Regeneron stock.
Chart courtesy of StockCharts.com
Shorty after prices peaked in August 2015, REGN stock started drifting lower. The broad market sell-off that gripped equities in January 2016, caused this drift to accelerate and it caused some serious damage to the Regeneron stock chart. Every valiant attempt to undo this damage has been thwarted.
The damage I am referring to is the bearish signal that was generated in January 2016. This bearish signal is referred to as a death cross. A death cross confirms that a bear market has already begun, and this indicator is generated when the faster 50-day moving average, highlighted in blue, crosses below the slower 200-day moving average, highlighted in red.
A death cross is a trend-following indicator and I have found it wise to always trade in the direction of this indicator. As a result, I can only justify two possible positions under such conditions, standing aside or shorting.
There have been numerous attempts at averting this signal but none have been successful. In July, REGN stock surged off a 52-week low, and this price action caused the moving averages to converge. By the middle of September, it seemed like the bulls would once again reign supreme, but that hope only lasted a brief moment as the bears quickly stepped in to push Regeneron stock lower, and the death cross failed to avert.
In November, following the presidential election, REGN stock surged, once again setting up another attempt at negating the death cross. This time, even I believed that this surge in price to $450.00 was going to finally give me reason to be bullish on REGN stock. To my dismay, price quickly retreated and once again the bearish signal failed to avert.
The bears are mighty and they have made it clear that they are not going down without a fight. The result from this emotional roller coaster ride is that $450.00 is an extremely important level of resistance, and the death cross is still intact, which means that lower prices are likely.
The following Regeneron stock chart illustrates that the plunge in price on Friday indicates that lower prices can be expected.
Chart courtesy of StockCharts.com
The price action following the brief surge in price after the presidential election has been outright bearish.
Price action is defined by waves. Bearish price action has impulse waves that take the price to a new low. These impulse waves then give way to consolidation waves that alleviate any oversold conditions that were created and set up the next proceeding impulse wave.
The sell-off from the November highs constitutes the impulse wave, and the sideways action that follows is the consolidation wave. The plunge in price that occurred on the back of the negative news has completed the consolidation wave and it implies that a new impulse wave lower is now in development.
The theory behind impulse waves that are separated by a consolidation wave is that the impulse waves tend to mirror each other in terms of length. If I apply this theory to that price action above, I generate a bearish price objective of $300.00-$290.00.
Bottom Line on REGN Stock
The sell-off that occurred on Friday triggered a pattern that suggests REGN stock has further room to fall. As a result, I am bearish on Regeneron stock and will continue to be so long as the stock chart suggests that such a view is warranted.