Chart of the day: Gilead is cooling as the market changes elsewhere for treatment with COVID-19

Just over a month ago, Gildes Sciences' (NASDAQ 🙂 remdesivir antiviral drug seemed like the big hope for coronavirus treatment. Investors went wild and made a huge bid for the shares of the biopharmaceutical company Forest City, California, with early trading stocks rising 11% higher on April 29, when news of its effectiveness was criticized announced.

The stock won $ 22.59, or 35.74%, between January 31 and April 29, but has since declined. This is because additional research has been lukewarm for the curative value of remdesivir.

While the results have shown that the experimental drug can help people with mild COVID-19, it is not the miracle cure that will kill the new coronavirus once and for all.

Many were skeptical from the start, as there is a long way from early testing to the actual launch of a finished medical product. And as if disappointing fundamentals weren't enough, technicals are now also indicating that the stock is about to end its upward trend.

GILD Daily

Hopes of treatment with COVID-19 pushed the price upwards after it was trendless since the December 26, 2018 bottom of $ 60.32. However, the stock fell below its upward trend and rising channel bottom on May 15, calling into question the trend's sustainability.

A second red flag occurred when the price climbed above the channel bottom again, but did not maintain these heights. It has since fallen, to the May 19 low of $ 72.30 as the price entered the rising channel.

Note that the 50 DMA is realigned with the channel bottom, while the 100 DMA supports the initial penetration layer. A drop below $ 72 would not only break the 100 DMA support, but would also have registered a second, lower trough, completing a downward trend.

Momentum issued a warning that the price increase is not sustainable – which resulted in a negative divergence as it declined from the rising price. The MACD has shown that a range of prices have fallen. The recent return move to retest the bottom of the channel – which has been held – drew the short MA above the long MA. However, it is now falling down again.

Our only concern is the lack of volume peaks with the downward outbreak. That would show a lot of interest. Instead, a return movement – in both directions – was accompanied by higher volume.

Although volume is important, it is secondary to the price. A drop below $ 70 would be a peak-and-off trend, the bread and butter of technical analysis.

Trading Strategies

Conservative traders would wait for the second trough, preferably with the 200 DMA, currently $ 68.87, then for a corrective rally before moving to short position.

Moderate traders are likely to wait for the second trough and for the profitable rebound, for better entry, not necessarily for trend confirmation.

Aggressive traders can fall short at will, provided they know how to draw up a coherent trading plan and move on.

Trade Example – Short Position Setup

Admission: $ 75 – on the rebound
Stop-Loss: $ 77
Risk: $ 2
Target: $ 69
Reward: $ 6
Risk: reward ratio: 1: 3

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