Biogen stock chart indicates decline presents bulls with unusual opportunity
biogenic (IBIB) – Get the report from Biogen Inc. On Wednesday, stocks rallied from lows but remained down more than 6%.
The drop comes as Medicare limits coverage for the company’s Alzheimer’s drug.
Shares slipped to their lowest level in two years on the news and were down more than 10% at today’s low.
But they decline right in a key area of multi-year support. Beyond that, it also gave traders a potential bullish reversal setup (which we’ll dissect in a moment).
It hasn’t been an easy ride for the stock. Shares of Biogen have closed lower in four of the previous five months and fell hard on Dec. 30 after a false takeover report.
But longs may have an opportunity here.
Trading Biogen shares
The weekly chart above highlights the strong support zone between $215 and $220.
Covid, bad news, income – you name it – and this area has acted as support. That doesn’t mean it will last forever, but it’s something bulls should note as Biogen’s stock spreads narrow today.
When we zoom in, the first thing I focus on is the December low at $221.72. This is clear on the daily chart below, as is the bullish divergence on the RSI reading (blue arrow).
As Biogen stock opened above $221.72, it quickly lost that level as it tried to find its footing.
Eventually, the stock was able to recover this level, giving traders a bullish reversal. This allows them to go long at the December low and use a stop-loss just below Wednesday’s low.
On the upside, my first target would be the decline in the 8-day and 10-day moving averages, followed by the gap fill level near $235. Traders looking for a quicker trade may consider using Tuesday’s low near $230 as their first price target.
Wednesday’s low may not be the bottom for Biogen stock, but with a tactical approach to the stock, it’s the one we can trade.