Bristol-Myers Squibb  (BMY) - Get Report has been on an absolute tear since its summer lows.

The stock made new highs on Friday and after opening lower on Monday has turned positive to rally 0.3%. That’s likely as Bristol-Myers won a key ruling over Gilead Sciences  (GILD) - Get Report to the tune of $752 million.

Monday’s gain may not be impressive, but the overall move sure is. From the July low to Friday’s high, the stock has rallied more than 52%.

Now the question is whether this is just the start of a powerful continuation or will shares of Bristol-Myers stock soon lose momentum? Let’s look at the charts.

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Trading Bristol-Myers Stock

Weekly chart of Bristol-Myers stock.

Weekly chart of Bristol-Myers stock.

When we look at the technicals, we’re often letting price action lead the way. In the case of BMY stock though, let’s consider the fundamentals.

Think about this: Even after the stock’s mega-rally over the past five months, Bristol-Myers trades at just 14.8 times this year’s earnings. Based on estimates for 2020 (after the Celgene merger), shares trade at a paltry 10.5 times earnings. Post-merger, revenue will go from an estimated $24.3 billion this year to more than $42 billion next year. Just earlier this month, management gave a 9.8% bump to the dividend, which now yields more than 2.8%.

These are just back-of-the-napkin numbers to think about, but it should help drive demand for shares of Bristol-Myers in 2020 provided the company can deliver.

That said, Bristol-Myers’ rally may be too much, too fast, and Monday's struggling price action suggests as much after Friday's reversal. Rallying 50% in five months makes it hard for new buyers to jump in without absorbing too much risk. 

The relative strength index (RSI), which measures how overbought or oversold the stock is, currently measures 78 on the weekly chart above. Typically, a reading north off 70 has correlated with a correction in Bristol-Myers stock price.

Shares ripped through the $62 level last week, which historically has been a level of resistance over the last five years. After rallying from $42 to $64 in just a few months, it’s tough to expect shares of BMY stock to hold the $62 mark on a pullback. However, if it does, that could be a great buying opportunity for bulls.

If it fails as support, look to see how Bristol-Myers stock holds up on a dip to the $56 to $58 region. That was a fourth-quarter consolidation zone (blue box) and should buoy the name on a correction, provided the stock falls that far.

The bottom line? Bristol-Myers has been red-hot and bulls will look for enticing fundamentals to continue driving it higher in 2020. However, look to buy the name on a dip to help improve the risk/reward.