Is Gilead Sciences Stock a Buy on Hopes of Coronavirus Cure?

Gilead Sciences kick-started a global stock market rally on Friday on hopes the company can find a coronavirus cure. Is Gilead Sciences stock a buy?

Shares of Gilead Sciences  (GILD) - Get Report were up 8% in Friday, trading higher on positive news of its leading drug remdesivir.

The company is using remdesivir in various trials to help treat coronavirus patients. It’s still early, but the drug has shown promising signs. After the close on Thursday, reports said the results were going well, which gave investors a sense of optimism rarely seen thanks to just one company.

These reports helped spur an overnight rally of more than 800 points in the Dow Jones Industrial Average and more than 90 points in the S&P 500. A 3.5% boost to the broader stock market, in addition to countless rallies in individual stocks all thanks to this report is, quite frankly, astonishing. 

Will the gains hold? So far, the answer seems to be no. However, as it pertains to Gilead, the news nearly sent shares to new multi-year highs, coming within pennies of its March high.

Let’s look at the charts for more clarity.

Trading Gilead Sciences Stock

The weekly chart of GILD stock. 

The weekly chart of GILD stock. 

Above is a weekly chart of Gilead Sciences stock, showing some of the larger trends and levels in play. Below is a daily chart showing a more focus look at the recent development.

On the weekly chart, you can see how well Gilead shares have been trading since breaking out over downtrend resistance (blue line) and the declining 200-week moving average. Admittedly, the stock has been volatile, as reports and rumors for the company’s coronavirus treatment were combining with elevated levels of volatility in the broader market.

Both charts emphasize recent resistance. The first level came into play near $80, a level that has kept each Gilead rally in check for nearly two months. Friday’s gap above this level is quite noteworthy, as bulls will now look for this former resistance mark to become support.

Daily chart of GILD stock. 

Daily chart of GILD stock. 

Now over prior resistance near $80, the March high is acting as a resistance point as a sell-the-news reaction drives shares of Gilead lower. It’s worth pointing out that in Thursday’s after-hours rally, Gilead stock rallied as much as 16.9%, climbing to $89.47.

That mark would put it just shy of the 2016 highs. The silver lining here is that investors now have an upside and downside roadmap.

As we said before, Gilead Sciences must hold support near $80 on the downside. Below opens it up to a retest of uptrend support (blue line) and the 50-day moving average. On the upside, $86 is resistance. Above that and the after-hours high from Thursday’s session and highs from 2016 near $90 are the next upside target. Above that and investors will start to shift their focus to the $100 mark.