Shares of biotech giant Gilead (GILD) are breaking out today. The stock, along with virtually the entire biotech sector, opened the session with a huge upside gap. This powerful move extends Gilead's rally off last week's low to nearly 10%. As this move continues to develop investors should become much more positive on the stock.
Last week Gilead dipped below the October low and appeared headed for a fresh down leg. This was the stock's fourth straight lower monthly low as the post second quarter earnings report collapse continued. On Friday Gilead began to recover and by the close had left behind a key upside reversal. Heading into this morning the rally continued while a divergent MACD (moving average divergence/convergence) low extended. Following today's ramp the area near the October/November lows may develop into a major bottom.
In the near term Gilead investors should consider the stock a buy on weakness. A very solid support zone is now in place between $77 to $74.50. This key area is marked by the September low and a scooping 50 day moving average near the upper band and this morning's breakout gap near the lower band. A dip down to this zone will create a low risk entry opportunity. On the downside, a close back below $73 would violate this week's low -- sending a clear warning sign in the process.