A Breakout For Biogen Idec

07/18/08 03:15:32 PM

by Arthur Hill

Biogen Idec has been moving higher with good volume since late June, and a recent triangle breakout opens the door to even higher prices.

Security: BIIB
Position: Accumulate

Figure 1 shows 60-minute candlesticks for Biogen Idec (BIIB). The stock bottomed at the end of June, surged, consolidated, and broke consolidation resistance at 60 in early July. Broken resistance turned into support around 60 and the stock formed a triangle above the resistance breakout. With another surge, the stock broke triangle resistance, affirming the short-term uptrend.

FIGURE 1: BIIB, HOURLY. The stock bottomed at the end of June, surged, consolidated, and broke consolidation resistance at 60 in early July.

Graphic provided by: TeleChart2007.

Figure 2 shows strong volume behind the advance and resistance for an upside target. The triangle breakout is clear and the next resistance area is around 67. This level stems from the April–June highs and marks the initial upside target. Upside volume (black bars) surged in late June and continued strong into July. The triangle breakout also occurred with above-average volume and shows strength behind the move. Resistance, here we come.

FIGURE 2: BIIB, DAILY. Note the strong volume behind the advance and resistance for an upside target.

Graphic provided by: TeleChart2007.

The bottom indicator window shows the stochastic oscillator nearing overbought levels. This momentum indicator oscillates between zero and 100 with readings below 20 deemed oversold and readings above 80 deemed overbought. Despite seeming overbought above 80, sustained readings above 80 also show continued strength and a continuing advance. Note how the stochastic oscillator moved above 80 in late March and remained above 80 into April (blue arrow). The stock was midway through its advance when the stochastic oscillator first moved above 80 in late March. The same thing could happen now as the stochastic oscillator nears 80 after a fresh triangle breakout.

Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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A Breakout For Biogen Idec

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