This week’s analysis will stick with the multiple timeframe approach. Today we are featuring a biotech stock with a channel breakout on the weekly chart and a classic retracement on the daily chart. Moreover, a larger bullish reversal pattern could be forming on the daily chart.
The weekly chart below shows Biogen (BIIB) in a long-term downtrend, but showing early signs of a bullish reversal. Note that BIIB is part of the Healthcare SPDR (XLV) and the Biotech ETF (IBB), both of which are leading the market since late October. On the price chart, BIIB surged in September 2022 and broke resistance. The stock continued higher into July 2023 and then fell into October 2023. This decline formed a falling channel (blue trendlines) and returned to the breakout zone (green shading). Notice that BIIB held above the 2022 lows (green dashed line) and broke the upper line of this channel with the advance in late 2023. This is promising price action.
The indicator window shows the percentage difference between the close and the 40-week SMA. Note that this indicator is part of the TIP Indicator Edge Plugin for StockCharts ACP. There are signal thresholds at +5% and -5% to reduce whipsaws. An uptrend signaled with the breakout in September 2022 as the indicator exceeded +5% (green arrow). The uptrend remained until the indicator moved below -5% in July 2023 (red arrow). A move above +5% would turn it bullish again. Even though this trend-following indicator has yet to trigger, I am also seeing promising price action on the daily chart. The stock is trading in a potential reversal zone on the daily chart and a classic bullish reversal pattern could be taking shape.
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Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
