Gilead Sciences (GILD) has come on my radar now from two sources that find the stock fundamentally sound and management great. After looking at this myself a little deeper I am ready for some technical analysis on it. I'm usually careful with pharmaceuticals and biotechnology stocks simply due to the FDA approval/non-approval risk but if enough items line up even this sector should lend itself well for an educated try with probabilities in our favor.
To the charts we go;
The weekly chart shows resistance at the downward-sloping trend line (blue dotted line) that currrently comes in around $42.50. Not far above is the 200 week moving average at $44. So, from a weekly perspective, should GILD be able to overcome those two points of resistance it should have fairly smooth sailing to around $49.
The daily chart looks even clearer. Note the blue zone, which is a still unfilled gap from all the way back from April 2010. The gap fill would complete at $44.75, which…maybe coincidentally or not, is a -23.6% Fibonacci extension if you measure the move from the December 2010 lows to the highs in April 2011. All in all, this is a good trade setup for a long-side try.
Stops depend on ones risk profile, but we are looking at $40 and target 1 at $43, target 2 $45ish, and target 3 as high as $49.