If you’re asking whether or not to buy Exelixis (NASDAQ:EXEL) stock, the answer is, “it depends.” But if you’re a risk-tolerant investor in search of an up-and-coming biotech doing more than a few things right, it’s time to consider buying EXEL stock. Let me explain.
If there is ever going to be a so-called perfect investment, you wouldn’t expect it to be a smaller-capitalization biotechnology company like Exelixis. But that’s really a generalization against a group of notoriously volatile stocks most investors need to think twice about before investing in. But that’s not the situation with EXEL stock.
The group as a whole has a backdrop of unstable financials, FDA approvals, the next drug trial finally being “the big one” or keeping larger competitors such as a Biogen (NASDAQ:BIIB) or Merck (NYSE:MRK) at bay. EXEL stock has defied those odds since mid-2016, when its kidney cancer blockbuster Cabometyx was approved.
Again, that’s not to say EXEL stock is the perfect investment. Bottom line, those types of risks don’t simply vanish. But for now, this $7.2 billion market cap stock with its attractive forward P/E of 17.6, 0.5 PEG ratio and priced at 8.5x sales is in a strong position with the success of Cabometyx and sports a solid development pipeline which may just yet, make Exelixis a household name.
EXEL Stock Weekly Price Chart
Looking at the weekly chart of EXEL stock and despite some of the aforementioned volatility associated with smaller-cap biotechs, it’s obvious Wall Street is also a buyer of what Exelixis has accomplished thus far — and what appears to be a promising future.
After a successful corrective challenge of prior lateral resistance and 62% retracement level from EXEL stock’s 2015 low to 2018 cycle high last October, shares have been trending higher in the right side of a cup-shaped weekly base. That’s bullish, and that’s not all.
Now and with EXEL consolidating the past month in-between the 50%-62% levels, a potential breakout and assault on the prior high of $32.50 before moving to new all-time-highs is setting up for purchasing.
Buying EXEL Stock
For investors agreeable with the risks discussed, the recommendation is to wait for a breakout. Without clearing the 62% retracement level, which has acted as price resistance thus far, there is a greater likelihood EXEL stock’s uptrend could fail until proper price confirmation reveals itself.
Not that a technical failure in this case is a bad thing. A turn lower in the share price of Exelixis could lead to an eventual double-bottom challenge. But I’d rather be a buyer of EXEL stock initiating a new position as it tests support than an investor long shares on the way down.
Having said that, buying EXEL stock above $25.41 and 10 cents above last month’s high within the consolidation pattern is the approach I’d use for entering into a long position. And again, as risks don’t simply go away, a blended stop below $23.37 makes sense. This exit contains risk to 8% and allows for enough technical wiggle room while putting oneself in a stronger position to buy EXEL during potentially much more challenging and opportunistic times ahead.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.