Trade of the Day: Jump on BIIB Stock on a Pullback or Breakout

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Biogen Idec Inc (BIIB) — This large-cap biopharmaceutical company develops and markets treatments for multiple sclerosis (MS), non-Hodgkin’s lymphoma and rheumatoid arthritis.

On Oct. 22, BIIB stock fell after the company reported sales of its flagship MS treatment Tecfidera were below expectations. However, adjusted earnings per share (EPS) of $3.80 beat the consensus estimate of $3.46. S&P Capital IQ forecasts 2014 revenue will increase 40% to $9.7 billion and operating earnings will jump 74% to $13.55 per share.

At the beginning of December, Biogen Idec announced positive preliminary data for a Phase I trial of its Alzheimer’s treatment, showing a statistically significant improvement in cognition after 54 weeks. The company said it would “very aggressively” pursue a Phase III trial.

Although Capital IQ analysts estimate commercialization is four to five years away, they note the potential market size is over $5 billion. Their 12-month price target is $400.

BIIB stock has traded in a 50-point range, between $300 and $350, since May. Very high volume accompanied the Dec. 2 breakaway gap associated with the announcement of the Alzheimer’s trial results, driving the price to the top of its range. But, in order for BIIB stock to move higher, it must break through the barrier at $350.

There are a number of positive technical developments. The 20- and 50-day moving averages have turned up, breaking through the 200-day moving average. High volume accompanied a clear breakaway gap, and MACD supports a move higher. However, MACD could also be telling us that BIIB stock may pull back before a break above $350. Support for a pullback rests first at $340, and then at the conjunction of the three moving averages at $320.

Buy BIIB stock on a pullback to $320 to $330 or on a breakout above $355 accompanied by high volume.

BIIB Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2014/12/trade-day-biogen-idec-inc/.

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