When the S&P 500 dives more than 36% in a month, the bulls have few stocks they can cling to. Those that hold up, or rally, are displaying what’s known as relative strength, something traders seek out in times of distress.
For Gilead, its approach to the coronavirus outbreak is what’s keeping buyers around.
The company is working on a treatment for Covid-19, a solution that seems necessary to stop the related worldwide health scare and economic destruction.
Gilead’s coronavirus treatment, remdesivir, was given orphan status by the Food and Drug Administration, which has investors optimistic that the company may have some serious traction.
With that in mind, let’s check the charts to see if the stock can maintain traction, too.
Trading Gilead Stock
Above is a five-year weekly chart of Gilead Sciences stock. The stock had a very quiet 2019, mostly trapped between $67.50 and $60.
Working in the bulls’ favor was the shallow but rising uptrend support mark (blue line). The stock continued to put in higher lows, before bursting higher earlier this year.
Gilead stock ripped over all its major moving averages, the most notable of which was the 200-week moving average. It also pushed above $67.50 resistance, rallying to more than $85 at one point.
Now down in the low-$70s, the stock has cooled off a bit. So what now?
The bulls have a somewhat favorable setup, which is tough to find in this tape. On the downside, significant support should sit between $65 and $67.
Should GILD stock retreat a bit further, it will only improve the risk/reward of the trade, as investors will have the opportunity to buy closer to this zone.
On the upside, the $77.50-to-$80 area has been stiff resistance for a few years now. Investors will be looking for a rally back to this area, especially given that Gilead has been one of the best stocks in the Nasdaq.
But a breakout will also be on many investors' minds - particularly if we get some good news regarding Gilead's coronavirus treatment.
Over $80 puts the recent high at $85.97 on the table. Above that and $90-plus is possible.
For now, see that support holds between $65 and $67. Above that keeps a retest of $77.50 to $80 resistance in play.