1 Stock to Buy, 1 Stock to Short: Pharmaceuticals

These stocks offer two ways to play the pharmaceutical space with technical patterns

   

All day I scan the charts looking for technical patterns to trade, both to the long and short sides. My Trending123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two technical events in these stocks for traders to take advantage of.

Buy the Symmetrical Continuation Triangle

5 9 13 arna 300x189 1 Stock to Buy, 1 Stock to Short: Pharmaceuticals
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Arena Pharmaceuticals
(NASDAQ:ARNA) has developed a symmetrical continuation triangle over the past 79 days.

In this pattern, the price breaks upward out of a consolidation period, suggesting a continuation of the prior uptrend. The trendlines converge as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range, reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.

Recommendation: Buy ARNA for an $11.50 – $12.20 target.

Short the Bearish Continuation Diamond

5 9 13 eltp 300x186 1 Stock to Buy, 1 Stock to Short: Pharmaceuticals
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Elite Pharmaceuticals
(OTC:ELTP) is a penny stock that has developed a bearish continuation diamond pattern over the past 96 days, making this a long-term play.

ELTP’s price has broken downward out of a consolidation period, suggesting a continuation of the prior downtrend. The continuation diamond began during a downtrend at the beginning of 2013 as prices created higher highs and lower lows in a broadening pattern. Then the trading range gradually narrowed after the high’s peak and the lows started trending upward. When the price breaks downward out of the diamonds boundary lines, it marks the resumption of the prior downtrend.

Recommendation: Short ELTP for a $0.02 – $0.03 target.

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InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the OpenParabolic Options and Trending123.  Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership. For more information on which service is for you click here.


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