Biotechnology is one of the top performing sectors during the recent bear market rebound. SPDR S&P Biotech ETF (XBI) is up more than 10% in the last week of trading; the best performer on our industry/sector watchlist.
We opened the hood and looked at the technical picture for XBI’s top 50 holdings to see which stock could be poised for a nice run. Trio our secondary review before settling on Alnylam Pharmaceuticals, Inc. (ALNY).
Editor’s Note: Monitoring exchange-traded funds performance is a good way to hunt for stock ideas. Money is flowing into the top performers, identifying the companies pushing the cart up the hill could make for timely trades.
ALNY recently confirmed a potential uptrend with a higher, current cycle low followed by a higher near-term high. Confusing wording, we know; think walking up stairs and the chart below provides clarity. On June 22, 2022, the Boston-based biotech closed above its 50-day moving average for the first time since the end of April. The 50-day cross is in conjunction with ALNY busting through the top side of a triangle or flag pattern. At the same time, its MACD line crossed into positive territory as ALNY’s Relative Strength Index accelerated higher.
This combination is bullish, not to be mistaken with bulletproof. Alnylam has some minor resistance at $145, a little stiffer resolve at $150, but would likely ultimately close the gap between $150 and $155 if the bear market run has legs.
On the downside, a tight stop with a close below $135 is where we’d consider cutting losses. That’s roughly $6 downside with $13.44 upside to $155, which is more than 2:1 reward-to-risk potential.
Swing Trading is only appropriate for super aggressive investors/speculators that can afford losses in short timeframes.