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Pounce on This Biotech Favorite If it Falls Back Into Buying Range

CELG broke from a rectangle consolidation, forming a steep bull channel


Celgene Corp. (NASDAQ:CELG) — This company develops small molecule drugs for the treatment of blood-borne and solid-tumor cancers and inflammatory diseases. The stock has been on the Trade of the Day buy list for over a year, and in January, S&P said it had “the brightest growth prospects among large-cap biotech companies.” 

On Jan. 9, I wrote, “Management provided encouraging guidance by adjusting earnings expectations for 2013 to $5.50-$5.60, up from a Zacks estimate of $4.91. The company’s oncology drug, Abraxane, is expected to be a blockbuster with sales estimates of $1 billion to $1.5 billion in 2015. And, according to management, it has other potentially high revenue drugs in its pipeline.”

Since then, S&P has boosted its target to $125. Analysts’ targets now range from $115 to $137.

In early January, CELG broke from a classic cup-and-handle on high volume followed by a breakaway gap. The stock then consolidated in a rectangle, and in late February, broke from it, forming a steep bull channel. From a technical analysis standpoint, it just doesn’t get better than this. The stock consolidates, pauses to gain new strength, and then breaks out again. 

The trading target remains $118 to $120, but the stock could go higher since short sellers have increased their positions by 48% to 5.53 million shares and now represent more than 1% of the float. Continue to hold CELG for our target of $125 and buy on pullbacks under $108.

CELG Chart
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