Shares of Biogen gapped down on Wednesday on negative news for its Alzheimer’s drug. But that could give bulls an opportunity.
Biogen (BIIB) – Get Biogen Inc. Report shares on Wednesday are crawling off the lows but remain down more than 6%.
The decline comes as Medicare limits coverage of the company’s Alzheimer’s drug.
The shares slipped to two-year lows on the news and were down more than 10% at today’s low.
But they are declining right into a key multiyear support area. Beyond that, it also gave traders a potential bullish reversal setup (which we’ll dissect in a moment).
It hasn’t been an easy run for the stock. Biogen shares have closed lower in four of the prior five months and fell hard on Dec. 30 after a false takeover report.
But longs may have an opportunity here.
Trading Biogen Stock
Weekly chart of Biogen stock.
Chart courtesy of TradingView.com
The weekly chart above highlights the strong support area between $215 and $220.
Covid, bad news, earnings — you name it — and this area has held as support. That doesn’t mean it will hold forever, but it’s something for the bulls to note as Biogen stock gaps lower today.
When we zoom in, the first thing I focus on is the December low at $221.72. That’s clear on the daily chart below, as is the bullish divergence on the RSI reading (blue arrow).
Daily chart of Biogen stock.
Chart courtesy of TrendSpider.com
While Biogen stock opened above $221.72, it quickly lost this level as it was trying to find its footing.
Eventually the stock was able to reclaim this level, giving traders a bullish reversal. That enables them to be long at the December low and use a stop-loss just below Wednesday’s low.
On the upside, my first target would be the declining 8-day and 10-day moving averages, followed by the gap-fill level near $235. Traders looking for a quicker trade may consider using Tuesday’s low near $230 as their first price target.
Wednesday’s low may not be the low for Biogen stock, but with a tactical approach to the stock, it is one that we can trade.
