The IBB index has been under pressure over the last couple of weeks even though it formed a nice Bullish Engulfing candlestick pattern. Some stocks in the index, like Tesaro have seen their share prices continue to skyrocket while others like Valeant have been under constant short-selling pressure. Macrogenics (MGNX) has been a member request in the past, so this update will focus on it.
But first, I think a lot of the recent volatility from the IBB and stocks in the index is based on the market thinking that Hillary is going to win the election. That has been the major cause for volatility and share price pressure for a lot of stocks in this sector, in my opinion.
No back to Macrogenics (MGNX) to see what its share price has been doing lately and see how it fits into the IBB’s current volatility.
Macrogenics (MGNX)
This 1 year daily candlestick chart for MGNX suggests that its current downtrend has a little more time to play out. Macrogenics is a stock that appeared poised to continue its uptrend the last time I wrote about it. That uptrend was put on pause while a Zig-Zag wave pattern is developing and calculates to a $24 price target for the pullback. I believe I was previously anticipating a pullback to the $25 area or so, but I don’t have the previous article to reference right now.
Wave C of the Zig-Zag wave pattern appears to be playing out right now. Wave C of a Zig-Zag wave pattern usually sub-divides into a Bearish Impulse wave pattern. The Bearish Impulse wave pattern is what I sketched out on the above chart.
The Hammer candlestick pattern that developed yesterday was on buying volume slightly less than the previous day’s volume. That seems to indicate the bottom of a Wave 3 in the Bearish Impulse Wave Pattern. The bounce right now is a Wave 4 in the pattern. Then there should be one more push below the low of the Hammer candlestick pattern to complete Wave 5 to the downside.
Macrogenics (MGNX) – Trading Channel
I was analyzing a 4 year weekly candlestick chart for MGNX because it captured all of its trading activity as a public company. At first, I drew an overhead resistance trendline. But then I turned that trendline into a channel – one of the cool features in my Think or Swim platform. The bottom line of the channel captured the lower range of MGNX’s share price pretty nicely.
The green trendline sits around the $22 mark. That looks to be a stronger support area than the $24 price target determined above. I would look to average down with some share purchases at the $22 – $24 area. This would be in anticipation of the run up to the top of the blue Trading Channel. But since the MACD Histogram on the weekly chart is just starting to show selling momentum, it could be another 2-4 weeks before this correction period has played itself out. Just in time for election results.
Macrogenics (MGNX) – Summary
I think Macrogenics (MGNX), like other biotech stocks that have been under pressure in the last month, have been pricing in a win by Hillary Clinton to be the next president of the US. With the pressure coming now, the stocks may do what many won’t expect after her probable election win – rally. I have a feeling that is why most stocks are taking their lumps now. As always, only time will tell if this analysis is right.
But in the meantime, stay prepared for a little more short-term weakness which could be used to average down on shares purchased higher. Wait for the MACD Histogram on the weekly chart to reverse and start to show decreasing selling momentum. If any other bullish signs are seen, averaging down is then recommended.
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