Upgrade Confirms Gilead's Price Strength

Gilead Sciences (GILD) was upgraded today by TheStreet's quantitative service. A look at the chart of GILD and you may say, "Thanks for nothing!" as prices have already rallied sharply the past two months. In fact, we turned from bearish to bullish on the stock last month.

So how should we put this upgrade into perspective? The cynic could say the upgrade was late. Sure, easy to say. The optimist might say the upgrade confirms what the charts had already signaled. The bull could say the upgrade reinforces the bull case and maybe we should buy more.

Lots of ways to spin things, but let's see what the charts and indicators suggest.

In this daily bar chart of GILD, above, we can see how prices have pushed to the upside accompanied by a strong and rising On-Balance-Volume (OBV) line. The OBV line turned up in June and confirms the rally with aggressive buying. We can see a bullish golden cross of the 50-day and 200-day moving averages in August along with the slope of the 200-day average turning up this month. There are no bearish divergences from the momentum indicator in the bottom panel so we know the rally is not slowing.

In this weekly chart of GILD, above, we can see prices are above the 40-week moving average line. The line is just starting to turn to the upside and that is the direction we want to trade in. The weekly OBV line has been improving the past three months and the weekly Moving Average Convergence Divergence (MACD) oscillator has crossed above the zero line for an outright go-long signal.

In this Point and Figure chart of GILD, above, we can see the "straight-up rally" since August (look for the "8" on the chart). There is a nearby price target of $88, but that does not mean the stock will stop there.

Bottom line: In the short run, GILD could trade sideways between $82 and $87, but further gains are expected after whatever pause there is near term.

Click here to subscribe to Quant Ratings, where you can read our full report on GILD or more than 4,000 other stocks that our service rates in real time every market day. 

However, please note that our Quant Ratings service assesses stocks using a proprietary computer model that runs a variety of factors through quantitative and technical analysis. Ratings do not necessarily reflect the opinions of Jim Cramer or other columnists, who may use different criteria to grade stocks. 

This column originally appeared at 12:54 p.m. ET today on Real Money, our premium site for active traders. Click here to get great columns like this from Bruce Kamich, Jim Cramer and other writers even earlier in the trading day.

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