While bulls were cheering the gains of more than 36% in premarket trading, some of that enthusiasm has been sucked out of the stock after the first few hours of trading. Shares of Biogen have retreated in rapid fashion, causing some confusion among investors.
The stock rallied after Biogen's third-quarter results, where earnings of $9.17 a share beat estimates by 90 cents. Revenue grew 5% year over year to $3.6 billion and beat analysts' expectations by $70 million.
Bur investors were very bullish after learning that Biogen was looking to move forward with its Alzheimer's treatment, aducanumab.
It's estimated that 5.5 million Americans and 44 million people globally have Alzheimer's, although only around 25% ever get diagnosed with it. Further, treatment for Alzheimer's has been notoriously elusive, as many companies have failed to meet their endpoints in multiple trials.
Biogen's treatment is showing promise and that has investors optimistic on its potential.
Trading Biogen Stock
Despite Biogen's big move in Tuesday's trading session, the decline from the highs has to be discouraging for some bulls. The rally-and-fade action is difficult enough without taking into account the fundamentals developments for the company.
Clearly a top- and bottom-line beat is bullish, as is the news surrounding Biogen's Alzheimer's treatment. But what do the charts say?
Biogen stock all but filled its gap toward $320, with Tuesday's high of $318 coming fairly close. Despite a steep pullback off the highs, Biogen's move is still stunning. Shares reclaimed the 20-day, 50-day, 100-day and 200-day moving averages, as well as all of its major Fibonacci retracements.
The move also propelled BIIB out of its multi-month range between $220 and $245. But what now? Let's use a few key retracements to guide us on Biogen stock.
So far, the 50% retracement near $280 has acted as support. Below that figure and the Tuesday low, puts more downside on the table. My first downside marks from that point would be the 61.8% retracement near $265 and the 200-day moving average near $255.
On a rebound, see if BIIB stock can reclaim the 38.2% retracement near $295. That puts the 23.6% back on the table at $313.74, as well as the gap fill up near $320. Above $320 and $338+ is possible.
With big, volatile names like this, it's often best to give the stock a few days to settle down. Just follow the stock, from level to level, seeing what's resistance and what's support.
Save 57% during our Halloween Sale.
Don't let this market haunt you and join Jim Cramer's Investment Club, Action Alerts PLUS.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.