Promising technical setups could help boost biotech stocks ACAD and BIIB
Healthcare stocks were rocked on Wednesday when President-elect Donald Trump told reporters that drug companies have been "getting away with murder" and that "we're going to start bidding" to lower drug prices. The sector is recovering some today, and a closer look reveals
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) and
Biogen Inc (NASDAQ:BIIB) could be on the verge of sharp upside moves. Below, we'll breakdown why ACAD and BIIB are well positioned to shrug off any near-term Trump-related headwinds.
Starting with ACAD, the shares have recently pulled back near their 40-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the stock has pulled back to this level six times in the past three years, and has subsequently moved higher 83% of the time over a 21-day time frame, averaging a gain of 5.6%. So far so good, as ACAD was last seen 5.9% higher at $31.63.
If the stock does rally, it would be bad news for the large number of traders who have shorted it. More specifically, short interest on ACAD is now at an all-time high, representing almost six days' worth of buying power, going by the security's average trading volume. What's more, it's an opportune time to buy premium on ACADIA Pharmaceuticals Inc.: the stock's Schaeffer's Volatility Index (SVI) of 70% ranks in the 10th percentile of its annual range, meaning the options market is currently pricing in low volatility expectations on ACAD's near-term options.
As for BIIB, the stock is nearing the 320-day moving average, a trendline that has historically resulted in outsized gains, looking back over the last three years. Specifically, the shares have moved higher three of the past four times they've pulled back to this trendline, averaging a 21-day gain of 6.7%. Today, BIIB is up 0.3% at $287.91.
An unwinding of bearish options positions could provide a lift for BIIB, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.26 ranks 1 percentage point from a 12-month high. Plus, Biogen Inc's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) is 1.34, meaning put open interest outweighs call open interest among near-the-money options in the front-month series. BIIB could benefit as these seemingly bearish traders throw in the towel.
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