Celgene (CELG) - Get Report has been trading in a narrow consolidation pattern since the beginning of this month. This healthy sideways action followed a strong rebound off major support near the January lows. Celgene is not yet in breakout mode, but conditions are improving. A clear take out of the February highs, just above $117.65, could provide the spark needed to send the biotech stock sharply higher.

Immediately after the election, Celgene exploded to the upside. The stock finished the Nov. 9 session with a 10.7% gain on its heaviest volume in over a year. This extremely powerful move quickly lost momentum leaving behind an ominous spike high. Celgene spent the next 10 weeks in pullback mode, while major support between $111.00 and $109.00 contained the downside. Celgene held this key zone, which marks the September high as well as the huge post-election breakout gap, at both the December and January lows. This solid support area could provide the footing for a new rally phase.

In the near-term, Celgene investors should keep a close eye on the $118.00 area. A move past this area would resolve the current February consolidation with an upside breakout. Prior to a breakout, Celgene should be considered a low risk near current levels. A close move back below the $114.50 area would violate the February low, sending a clear warning sign that more consolidation is ahead before a fresh rally can take hold.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.