Buy Gilead on Immunomedics Deal? Let's Look at the Charts

Gilead Sciences is up slightly on Monday after announcing an agreement to buy Immunomedics. Here's how the stock is setting up on the charts now.
Author:
Publish date:

Gilead Sciences  (GILD) - Get Report shares were up about 2% on Monday on news that the company will acquire Immunomedics  (IMMU) - Get Report.

The deal is worth $21 billion and values Immunomedics at $88 a share. That’s about a 108% premium to Friday’s closing price, although shares are “only” up 99% to $84 on the day.

Gilead shares were off to the races earlier this year in hopes of a coronavirus treatment. Others, like Moderna  (MRNA) - Get Report, Johnson & Johnson  (JNJ) - Get Report and AstraZeneca  (AZN) - Get Report are also in the race, among many others.

In any regard, Gilead stock has lost its momentum, falling in each of the prior four months and declining in seven of the past eight weeks.

Can its recent M&A action get it back in action? Let’s look at the charts.

Johnson & Johnson is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JNJ? Learn more now.

Trading Gilead Stock

Daily chart of Gilead stock.

Daily chart of Gilead stock.

Notice the pop Gilead stock saw in February when the rest of the world was beginning to worry about the Covid-19 situation. In March, shares began to really ratchet up the gains — albeit with a heavy dose of volatility.

What followed what a series of choppy yet bullish climbs. However, resistance continued to hold at $84, then later at $78. Without a rotation over these levels, Gilead was unable to sustain its upside move.

Once uptrend support (labeled “No. 2” on the chart) broke in July then acted as resistance on the retest, bulls needed to step aside. Gilead ultimately flushed from the mid-$70s to the low-$60s on that move.

With Monday’s rally, shares are reclaiming the key $66 level and the 20-day moving average. These two marks become vital levels to hold if bulls are buying in on the M&A news.

Below these marks and a retest of the recent low is in play. Below that and the 2020 low at $60.48 is on the table. 

On the upside, the 50-day and 200-day moving averages are reasonable short-term targets to watch for. Above puts bulls in an even better position and leaves the August high in play at $71.56.

Above that puts the June and July highs on the table near $78, although Gilead will need to see some serious momentum continuation to get there.