If the charts are to be believed, the path of least resistance for Biogen, Regeneron, Celgene and Gilead is up-up-up. In fact, these 4 biotech stocks are known as Jim Cramer’s “4 Horsemen of Biotech.” Although these stocks’ fundamentals have appeared bullish to Cramer for quite some time, he often turns to technicals for further insights. He tapped me for my charts, and guess what? Cramer’s 4 Horsemen look like they could gallop a lot higher (check out my analysis below)!
Biogen has had a series of higher highs and higher lows – a bullish pattern. I believe Biogen has a strong floor of support at about $316, just a few points from Wednesday’s close. Additionally, because of this “floor of support,” I am buying at current levels, because I think downside will be limited while upside could be significant. Biogen has a ceiling of resistance at $334, and if it can break above that level, it should be smooth sailing to new highs.
The daily chart of Regeneron suggests the stock is facing strong resistance at $315, a level at which the stock has failed before. However, if shares slip down to $300, I will buy due to strong volume trends and a positive mention in the New England Journal of Medicine. In fact, I can see enough bullish momentum building for Regeneron that it could ultimately pierce $315. If and when that happens, Lang we could see Regeneron trading back up at $352, a former all-time high.
Although Gilead has advanced sharply since April, patterns suggest that the stock could still trade higher. Specifically, I have identified an inverse head and shoulders formation, a move that’s considered extremely bullish by investors who follow technical patterns. By measuring the distance between the bottom of the head and the neckline, I am able to determine how much upside may lie ahead. In this case, Gilead could trade up to $100 – that’s a gain of more than 10% from where the stock is currently trading.
Celgene has also rallied sharply over the past several months. However, analysis suggests it could continue higher – perhaps up to $100 – before it runs out of gas. My bullish outlook is due, in part, to the stock’s recent advance despite disappointing phase 3 data from the company’s arthritis drug, Otezla. When a stock rallies in the wake of negative developments that should send it lower, that price action is considered a very positive sign.