Trading Regeneron as It Hits New Highs on Government’s $450M Deal

Regeneron snags a $450 million award from the U.S. government for its coronavirus treatment. The news is propelling the stock to new highs. Now what?
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Regeneron  (REGN) - Get Report shares were moving higher on Tuesday, up more than 4% as the company reached a deal with the U.S. government.

The company was awarded a $450 million contract to “produce its developing coronavirus treatment,” as earlier noted on TheStreet.

Novavax  (NVAX) - Get Report also was rallying on the day, up an astounding 30% on the government’s $1.6 billion award. Gilead Sciences  (GILD) - Get Report, Moderna  (MRNA) - Get Report and others are also working on a treatment.

The rally in Regeneron is helping the stock run to new all-time highs. Let’s look at the charts to see if the gains can continue.

Trading Regeneron Stock

Daily chart of Regeneron stock.

Daily chart of Regeneron stock.

With Tuesday’s rally, Regeneron is pushing through the $640 level and clearing last month’s high, which came into play at $646.33.

This stock has a tendency to find resistance, consolidate, then push through resistance which then becomes support. That price action is quite healthy, particularly in stocks trending higher like we’ve seen in Regeneron over the past several months.

Unlike most stocks, shares did not top in February and plunge in March. Instead, Regeneron bottomed in January, then rallied amid the coronavirus selloff.

Most recently we’ve seen Regeneron stock push through $585 resistance — which then turned to support — before clearing the $600 area, which was the prior high from 2015. Amid this rally, the 20-day and 50-day moving averages continue to guide the stock higher.

What now? This is where things get tricky.

Because the move has been so broad and powerful, it’s not one we want to bail on. The momentum-measuring MACD reading is turning in bulls’ favor (blue circle on the chart), while the stock is rotating over the June highs. Shares are also not overbought, which creates potential room to run on the upside. 

Measuring the June range, it puts the 138.2% and 161.8% extensions in play up at $664 and $675, respectively.

Longer-term investors may prefer to measure from the 2020 low to the 2020 high and use the 123.6% extension up near $721 as their upside target.

On the downside, holding its key moving averages would be nice. But more important to me is that the prior 2015 high near $600 holds as support, as well as prior range resistance near $585.

Below $585 presents an issue for bulls.