Biogen (NASDAQ: BIIB) is active in one of the most interesting fields. As the name suggests, we’re talking about a pharmaceuticals company:
Biogen is a global biotechnology company that specializes in the discovery, development, and delivery of therapies for the treatment of neurodegenerative, hematologic, and autoimmune diseases to patients worldwide.
Their products are designed to help mankind through ground-breaking research and medical technology, to address some of the world’s most difficult diseases.
That being said, it is worth mentioning the jump higher their stock price saw after Biogen announced a revolutionary medicine that, for the first time, seems to be able to tackle some symptoms of Alzheimer’s Disease.
Alzheimer’s Disease is named after a German doctor Alois Alzheimer and is known as the disease that is the most common cause of dementia.
So far, no medicine has managed to find a cure to stop the advancement of Alzheimer’s once it is discovered in an individual, that is, until Biogen made their break-through.
Investors cheered the announcement and sent the company’s stock to over $450/share, making it look extremely overbought.
Is it overbought? I would say yes, at least in the short to medium term.
On a technical analysis, the break higher came after an ascending triangle that had the b-d trend line acting as a resistance for quite some time. That trend line needs to be retested now, and not only that, but such a retest will offer the perfect striking price for a call option with a one-month expiration date.
One thing should be mentioned here: that a triangle appears, in terms of the Elliott Waves Theory, either as X waves (or connecting waves) that connect two simple corrections. My take is that the break higher was only part of the second correction and now we should look to trade the c wave up.
The market is resting on the 381 level now, but I would recommend waiting for the 350-352 level as that would assure the retesting, and that would be the place for our call option.
On the bigger picture, the sector itself looks like a promising one. If one is looking for defensive stocks to add a hedge to any kind of portfolio, then the big drug companies may be the best option to offer that kind of value.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
