Prepare For a Big Drop On This Biotech Stock

Sometimes the stock market gets on a run and all you can do is just jump on and enjoy the ride.

Of course, it’s the same thing with individual stocks. Once the wind is at their backs they can just take off and run to previously unforeseen heights.

However, we know that all runs must come to an end eventually. The million-dollar question is, when?

This is where technical analysis can sometimes help.

Commonly, stocks getting ready to reverse lower, or higher, will give technical signs in the way of price action or momentum.

One biotech stock in particular that has done exactly that is Agios Pharmaceuticals AGIO.

From a technical standpoint, there are several warning signs at play on AGIO.

First off, simply the upward slope in general is worrisome. Stocks that start to accelerate upward in this fashion often come crashing down. Unfortunately, it’s difficult to see the end coming, if at all.

Next, on Friday, Agios formed a common reversal candle known as a shooting star candle. After a big run-up, this type of candle often signals a reversal of some magnitude.

Most traders prefer to see their shooting star candles confirmed, which is often that of a lower close.

Lastly, over the course of Agios’ last 3 price peaks, the corresponding momentum peaks have been lower. This momentum divergence also tends to precede a decline of some measure.

Obviously, investors must conduct their own due diligence before investing in any stock, but stocks with multiple technical warning signs more often than not will see a decline of some extent.