Gilead Rises Amid Spread of Coronavirus Outbreak - Here's the Trade

Gilead is rallying Monday despite Wall Street being slammed on coronavirus concerns. Here's how to trade the stock from here.
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It’s a sea of red in the stock market Monday, but not for Gilead Sciences  (GILD) - Get Report as shares were trading higher by about 4%.

It seems that investors are starting to see the pain the coronavirus may inflict on the global economy. Whether it’s a short-term blip or something bigger, a negative impact is making its way through the market.

That is, except for Gilead. The company is one of the few biotech firms that’s had some success in combating the coronavirus with its remdesivir drug. According to the World Health Organization, it’s the “one drug right now that we think may have efficacy.”

That’s a pretty big statement in this situation and easily explains why Gilead shares are up in Monday’s tough tape. It also make Gilead a top candidate for Real Money’s Stock of the Day.

Let’s look at the charts.

Trading Gilead Stock

Weekly chart of Gilead stock. 

Weekly chart of Gilead stock. 

Unlike some of the indices, Gilead hasn't been enjoying a powerful rally to new highs. In fact, the stock has continued to churn in the mid-$60s, unable to garner much upside momentum.

On the plus side, the stock had been putting in a series of higher lows (blue line), after temporarily breaching $60 range support. Who would’ve thought that a potentially global outbreak of coronavirus would be the catalyst to Gilead’s breakout?

Shares have been trading better, and as the virus has gained traction, so too has Gilead. It has pushed through downtrend resistance (purple line) and held this mark as support over the past few weeks. Additionally, GILD stock reclaimed the 200-week moving average, holding that mark as support for several weeks as well.

Where do we go from here?

The $74 to $75 area was notable resistance in the second half of 2018 and was never tested in 2019. It’s no surprise that it’s now acting as resistance once again. On the upside, this is the level to watch. Above it puts $80 on the table.

On the downside, see if shares fill this week’s gap back down toward $70. In that event, see if buyers step in and take Gilead stock back up toward $75 resistance. A gap-fill also puts the 200-week moving average back on the table, as well as the rising 10-week moving average. Below all of these marks could spell trouble for Gilead bulls.

Here’s the bottom line: Over $75 to $76 resistance puts $80 on the table. Below keeps a gap-fill down to $70 in the realm of possibilities.