REGN Stock: Constructive Developments
Regeneron Pharmaceuticals Inc (NASDAQ:REGN) reported earnings on May 4, 2017, and although it missed on the bottom line, REGN stock is still surging higher by 5.51% on the back of a positive reinforcement of forward guidance. I have been starting to focus on biotechnology stocks as of late, because I have an inclination to believe that the lagging performance that has plagued this sector is soon going to be a thing of the past, and this sector is going to play some catch-up. The indications on the Regeneron stock chart are not bullish just yet, but there have been constructive developments that are beginning to point in that direction.
As a quick recap for anyone who has not read any of my previous publications, my views on a potential investment are generated by analyzing the companies stock chart. This method of investment analysis is known as technical analysis, and I have been refining my skill in this method of analysis for close to two decades because I have found great value in the information it provides.
The following Regeneron stock chart illustrates the constructive price action that is currently in development. Completion of this price action would suggest that higher REGN stock prices are likely to follow.
Chart courtesy of StockCharts.com
The Regeneron price chart above is a great example of constructive price action. Constructive price action consists of an alternating two-wave structure that contains impulse waves and consolidation waves.
The function of an impulse wave is the progression of price, which can come in the form of an advance or a decline. The function of a consolidation wave is to unwind any extreme overbought or oversold conditions conditions that were created during an impulse wave, and more importantly, set up the next impulse wave. This alternating wave structure creates the necessary conditions that allow a trend to remain sustainable.
I focus quite a bit of my attention on consolidation waves, because these waves set up impulse waves. The direction that an impulse wave takes is contingent on the direction in which price exits the consolidation wave. Exiting the consolidation wave in an upward direction suggests that an advancing impulse wave is set to develop, while exiting the consolidation wave in a downward direction suggests that a declining impulse wave is set to develop.
In the lower panel of the price chart, you will find the moving average convergence/divergence (MACD) indicator. This trend following momentum indicator uses signal-line crossings to distinguish whether bullish or bearish momentum is influencing the performance of an investment. The MACD indicator has an impeccable track record of correctly identifying what type of wave is in development.
A bullish MACD cross was generated in the middle of 2010, and it served to suggest that bullish momentum was influencing REGN stock. As a result, the path of least resistance was geared towards higher prices. This indicator correctly indicated that an impulse wave was set to develop.
In December 2015, a bearish MACD cross was generated, indicating that bearish momentum was influencing Regeneron shares. This served to indicate that the path of least resistance is geared towards lower prices. This indicator correctly identified that a consolidation wave was set to develop.
The signal lines that are used to create the MACD indicator are currently converging at the zero line, and it is possible for a bullish cross to develop in the not-too-distant future. This would suggest that a new advancing impulse wave is set to develop, which would also imply that new all-time highs are on the horizon. This view is of course contingent on price exiting the consolidation wave in an upward direction.
The following Regeneron stock chart takes a closer look at the consolidation wave that is currently in development.
Chart courtesy of StockCharts.com
The consolidation pattern is taking on the form of a rounded bottom formation. This pattern exhibits the characteristics of a trend that slowly changes its bias from bearish to bullish. This change in bias creates the rounded bottom shape of this pattern.
There is currently a level of price resistance at $450.00 that has contained all previous attempts at an advance. The first indication that this pattern is approaching completion would involve price breaking above this level of price resistance. This event would mostly likely coincide with a bullish MACD cross.
I would take these two indications to suggest that REGN shares were on their way to take out the previous high of $605.93 that was set on August 4, 2015. Taking out the all-time high would confirm that an impulse wave is in development and much higher prices are likely to follow.
Bottom Line on Regeneron Stock
Biotechnology stocks have started to catch a bid and this bodes well for companies like Regeneron stock. The REGN stock chart is constructive in that there are a number of developments, that when completed, would support the view that higher stock prices are on the horizon.