All day I scan the charts looking for technical patterns to trade, so I found it quite interesting when my Trending 123 Pattern Scan powered by Recognia showed three bullish chart patterns with three different time horizons in the biotech and pharmaceuticals area. No matter your timeframe, these three stocks have intriguing chart patterns that can get you started on researching one of these for a buy.
Short-Term: Two to Six Weeks
Click to EnlargeAcorda Pharmaceuticals (ACOR) is a commercial-stage biotech/pharmaceutical company that develops drugs for neurological conditions, and looking at the chart, the company’s stock is doing quite well, at least in the short term.
The price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend. The stock is showing a symmetrical continuation triangle in which two 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 ACOR for a short-term target of $37.00 – $37.70.
Intermediate-Term Pattern: Six Weeks to Nine Months
Click to EnlargeAchillion Pharmaceuticals (ACHN) is a pharmaceutical company that produces drugs for infectious diseases. The stock has developed a symmetrical continuation triangle like ACOR, but over the past 47 days, indicating that it will take longer to play out.
However, as you can see in the chart, the price has already started to break out on higher volume this week, meaning the pattern is likely confirmed.
Recommendation: Buy ACHN for an intermediate-term target of $9.90 – $10.30.
Long-Term Pattern: Over Nine Months
Click to Enlarge Alexion Pharmaceuticals (ALXN) serves patients with rare life-threatening diseases, and it must be doing something right if you take even a passing glance at its chart. ALXN has developed a continuation diamond over the past 154 days, which means this bull trend is likely to continue.
A diamond bottom pattern begins during a downtrend (in ALXN’s case, it looks like a consolidation period on the chart) as prices create higher highs and lower lows in a broadening pattern. Then the trading range gradually narrows after the highs peak and the lows start trending upward. When the price breaks upward out of the diamond’s boundary lines, it marks the resumption of the prior uptrend.
Recommendation: Buy ALXN for a long-term $125.00 – $130.00 target.
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 Open, Parabolic 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.