Breaking news and a long-term bottom in a fan-favorite stock take the lead on this morning’s Three Big Stock Charts.
Just a short time ago, Bristol-Myers Squibb Co (NYSE:BMY) announced that the trial of their drug named Opdivo did not meet endpoint survival goals. The news has Bristol-Myers shares gapping lower while Merck & Co., Inc. (NYSE:MRK) shares are surging on increased sales implications of Keytruda due to less competition. From the longer view, Fitbit Inc (NYSE:FIT) shares have gained some traction that’s worth taking a closer look.
Bristol-Myers Squibb Co (BMY)
As mentioned, Bristol-Myers announced that a trial investigating the use of Opdivo did not meet its primary endpoint of progression-free survival in patients with previously untreated advanced non-small cell lung cancer.
The results of the news have Bristol-Myers shares trading around $63, almost 16% lower than last nights close. The gap lower will wipe out 12 months of growth for Bristol-Myers, likely sparking a round of intermediate- and long-term selling as the stock will almost instantly shift from a long-term bull market trend to a bearish trend.
This move, like any other fast decline, will also create a short-term oversold signal from Bristol-Myers RSI readings. Traders should watch for this to combine with round-numbered support from the $60 price level to potentially grab the stock for a dead cat bounce that could pocket 5% to 10% after this move, or steer clear of the shares as a new technical trend will need to form in reaction to today’s shake-up.
Merck & Co., Inc. (MRK)
The winner of Bristol-Myers’ bad news is Merck & Co whose drug, Keytruda just lost a key competitor in the market. The results in pre-market trading had Merck shares trading 17% higher.
The move higher fortifies a long-term transition that had already been in the works for Merck shares after they spent the last three months transitioning into an intermediate-term bullish trend with its 200-day moving average shifting into an ascending pattern. In addition, today’s move will increase the momentum readings for Merck based on its MACD.
Like Bristol-Myers, Merck is likely to see some regression from this short-term move as traders will take the opportunity to close out some large profits. However, due to the impact on long-term fundamentals, any overbought selling should be shallow and limited. In other words, this trend is likely to hold and become even stronger as Merck moves into New High territory.
Fitbit Inc (FIT)
Traders have been looking for an opportunity to make money on Fitbit on every dip since the stock topped out over $50 and it looks like they’ve got their chance now after bottoming at $12.50.
Fitbit shares have spent the last three months trying to build a bottom above $12.50, successfully. Now, the most recent earnings report has given the shares a fundamental driver and even some hope that the company may be eyed as an acquisition target.
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Fitbit shares are a little overbought right now according to their short-term RSI. However, the trendline improvements are suggesting that there is additional upside for the stock. This week, the 20-day moving average is crossing above the 50-day moving average. In-house we refer to this as a “silver cross.”
The last occurrence of this pattern was in April ahead of a 20% rally in shares over a one-month period.
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
