Nasdaq 100 Component Vertex Pharmaceuticals Incorporated (VRTX) fell a staggering 20.5% on Thursday after halting development of a key pipeline candidate for the treatment of liver disease. The $ 70.4 billion company ranks 16th out of 702 US publicly traded pharmaceutical and biotech companies, a quick negative reaction to the iShares Nasdaq Biotechnology ETF (IBB) and other sector games.
The central theses
- Vertex Pharmaceuticals fell more than 20% in one session after a drug candidate was discontinued.
- The downtrend could quickly be anywhere between $ 180 and $ 200.
- The stock could act for a long period of time before a larger-scale rebound, which is tied to range.
Vertex has benefited from the flow of money into the sector as a result of the pandemic, although there is no lead candidate in the race for a vaccine. However, a successful drug pipeline has resulted in a decade of rapid growth and an endless string of new highs. Even so, the stock has traded poorly since its all-time high of $ 306.08 in early July and is now down more than 30% from the summer peak.
This week’s downturn is also broken support on the 200 days exponential moving average (EMA) for the first time since 2016 confirming a downtrend showing plenty of support below USD 200. However, Bottom fishermen should likely avoid exposure until the decline falls through this level and the downward momentum subsides. Given the sheer force of this week’s sell-off, which saw its highest volume since 2013, it will likely take a few months at least.
Wall Street analysts lowered targets after the news, but ratings haven’t changed yet. The “Moderate Buy” consensus is based on 13 “Buy” recommendations and 5 “Hold” recommendations. No analyst recommends shareholders close their positions. Price targets Currently, they range from a low of $ 267 to a street high of $ 328, while the stock opened nearly $ 50 below the low on Friday. Expect more goals to be lowered in the days ahead as this potential source of income is taken off the table.
Momentum is the speed or speed of Price changes in a share, security, or tradable instrument. Momentum shows the rate of change in price action over a period of time to help investors determine the strength of a trend. Stocks that tend to move with the strength of momentum are known as momentum stocks.
Vertex Pharmaceuticals Long Term Chart (2000-2020)
A parabolic rally peaked at $ 99.25 in 2000 and posted a high that was unquestioned for the next 14 years, before a steep decline that “burst the bubble”. It settled in the single digits of assistance in 2004 and has gotten higher and stalled in the mid-1940s in 2006. That level was evident resistance through 2013, when the stock confirmed a breakout and the subsequent uptrend completed the long journey into the post-millennial peak of 2014.
Mixed price action finally lifted that barrier in 2017, giving way to a small spike, followed by quick gains to the all-time high of over $ 300 in July 2020. This week’s sell-off is rapidly approaching 2018 and 2019 highs in the 190s Years and marks a strong support that should slow or end the downtrend. The 50-month EMA is now rising into the same price zone, increasing the likelihood of a sharp rally at or below $ 200.
However, the timing of a reversal over the next few weeks is not random as the monthly stochastic oscillator is in an active sales cycle predicting weakness through the end of the year. This, in turn, suggests that the stock will bottom quickly and enter an area-bound phase that may take months before transitioning into a new uptrend or breaking the trading floor and heading towards much lower price levels.
Range-bound Trading is a trading strategy that aims to identify trading stocks in price and capitalize on it channels. After finding important levels of support and resistance and connecting them to the horizontal Trend linesA trader can buy a security at the lower trendline support (at the bottom of the channel) and sell at the upper trendline resistance (at the top of the channel).
The bottom line
Top biotech performer Vertex Pharmaceuticals lost more than 20% of its value Thursday after hiring a key pipeline candidate.
Disclosure: The author held no positions in any of the above securities at the time of publication.