GILD has now hit & slightly exceeded my 81.76 target, which will most likely prove to be a momentum-fueled overshoot of that level, followed by a 9% drop to the 76.50 area. I starting making the bullish case for a meaningful trend reversal & rally earlier this year as GILD was approaching the key long-term support level of 64.75 while poised to break above a bullish falling wedge pattern, confirmed with positive divergences.
Gilead was an unofficial trade idea with numerous updates posted on the front page & within the trading room since the stock bottomed around that 64.75 support level. The most recent update posted about a month ago when the negative divergences & a small rising wedge pattern were highlighted just before the stock was scheduled to report earnings. The stock was trading at 74 then (chart above) and did gap up after earnings, hit the price target/resistance & then immediately reversed, going on to break down below that wedge & correcting about 6%. The correction, which was inline the the magnitude of that small wedge & the accompanying divergences, cleared out the overbought conditions, allowing the stock to then resume the primary uptrend. Gilead went on to make a very impulsive breakout above the primary (yellow) downtrend line & the intersecting 76.50 resistance level, which helped provide the fuel for yesterday’s big 7½% rally which has so far carried over into today as a typical momentum-fueled overshoot of that level.
At the very least, I’d expect the stock to fall back to close on or below the 81.75ish resistance level very soon (a pullback of 2.8% off today’s highs) and quite likely a move back down to test the 76.50 support level from above, before the stock resumes the uptrend. As the momentum is still strong in GILD & the biotech sector (largely a result of the rally in Gilead), I am not adding this an an official short trade. Merely pointing out my thoughts for both those that took the stock long around the 64.75 support or any of the breakouts that occurred afterwards or those interested in a pullback short trade (with a stop above today’s high).