Sanofi (SNY) has the opposite problem right now. Shares of this pharma giant have been in an uptrend since the broad market bottomed in June, rallying more than 25% in the process.
But that sort of upward momentum can't last forever -- and shares of SNY have been consolidating sideways in a rectangle pattern since mid-September as a result.So, how do you trade this big pharma firm? For starters, it's important to remember that consolidations like the one in SNY aren't necessarily a bad thing, especially after a big move. A sideways move after a big rally gives investors a chance to catch their breath and figure out their next move. More importantly, it gives the stock a chance to establish support before moving higher. That doesn't mean that SNY is a buy right now -- instead, it's best to think of the rectangle as an "if/then trade." So, if SNY breaks out above $45 resistance, then buying pressure has overcome a pocket of gains-taking sellers, and traders have a buy signal. Otherwise, if shares of SNY fall down below $43 support, then it becomes a short candidate.
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