Nonetheless, the stock remains in a volatile trading range between its monthly value level at $68.91 and its weekly risky level at $79.41.
Read on to find out how to trade the stock of the Foster City, Calif., biopharma.
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At Monday’s open at $75.80, Gilead shares are up 17% year to date and in the bull-market territory 25% above their Oct. 3 low of $60.89.
The stock is also in a correction 12% below its 52-week high of $85.97 set on March 19.
The stock is fundamentally positive with a p/e multiple of 12 and dividend yield of 3.7%, according to Macrotrends.
In the past two quarters, Gilead missed earnings-per-share estimates but without negative performances on its daily or weekly charts.
When you see the volatility on the charts below, you will see the importance of using value levels at which to buy on weakness and risky levels at which to sell on strength.
The Daily Chart for Gilead Sciences
Courtesy of Refinitiv XENITH
The daily chart for Gilead shows that a golden cross formed on Dec. 20. That's when the 50-day simple moving average rose above the 200-day simple moving average, signaling that higher prices would follow.
It took a while for this buy signal to kick in. That gave investors the opportunity to buy the stock at its 200-day SMA when it was $65.38.
Observe the huge up-and-down volatility, particularly between a low of $64.41 on March 16 to a high of $85.97 on March 19, which was a spike of 33%.
The low was below the 200-day SMA, then at $66.06.
The close of $74.76 on March 31 was in the middle of this volatility band. This price was input to my proprietary analytics and resulted in a second-quarter value level at $62.63 and a monthly value level at $68.91. This week’s risky level is $79.41.
The Weekly Chart for Gilead Sciences
Courtesy of Refinitiv XENITH
The weekly chart for Gilead will be positive if the stock stays above below its five-week modified moving average of $72.92 at this week’s close.
The stock is also above its 200-week simple moving average, or reversion to the mean, at $71.52.
The 12x3x3 weekly slow stochastic reading is projected to end this week at 54.7, slipping from 54.84 on April 10.
If it ends this week rising with the stock above $72.92, the weekly chart will be positive.
Trading Strategy: Buy Gilead Sciences at its 200-week SMA at $71.52 and on weakness to its monthly value level at $68.91. Reduce holdings on strength to the weekly risky level at $79.41.
How to use my value levels and risky levels:
The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the past nine closes in these time horizons.
Second-quarter 2020 and monthly levels for April were established based on the March 31 closes.
New weekly levels are calculated after the end of each week.
New quarterly levels occur at the end of each quarter. Semiannual levels are updated at midyear. Annual levels are in play all year long.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
How to use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the past 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.
A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.
A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.