Great News For Biogen, But What's Next For The Stock?

The market was up nicely on Tuesday, but the biotech industry was up even more.

Names like Gilead Sciences, Inc. GILD, Vertex Pharmaceuticals Incorporated VRTX and Jazz Pharmaceuticals plc - Ordinary Shares JAZZ were all up 1.5 percent or more.

Another biotech stock, Biogen Idec, was up over 6 percent yesterday, but on a positive news development rather than just because the whole industry was higher.

Biogen popped after the company said its experimental drug to treat Alzheimer’s showed promise in an early-stage trial and that it would now be moved to phase 3 trials.

The question for investors now is whether or not Biogen has more room to run. The analysis of the stock below should help to answer that question.

The company: Biogen Idec Inc (NASDAQ:BIIB)

Sector: Healthcare

Industry: Biotechnology

Biogen Idec discovers, develops, manufactures, and markets therapies for the treatment of multiple sclerosis, neurodegenerative diseases, hemophilia, and autoimmune disorders.

The company has collaboration agreements with Genentech, Inc., Acorda Therapeutics, Inc., Sangamo BioSciences and Swedish Orphan Biovitrum AB.

Review the one-year chart of Biogen with the added notations:

Thanks to yesterday’s good news, Biogen has broken out of its down channel, which is certainly a plus for the stock.

However, the stock is now approaching its prior trendline of support, and that trendline has already been tested on 2 prior occasions as resistance. So, we know the trendline still matters.

A push above that trendline should lead to a run up to the $350 level, and a break above that mark probably means a new high.

Unfortunately, a fall back into the down channel would be a bearish sign for Biogen.

The stock closed yesterday at $328.27.

Related: Here’s The Latest Biotech Breakout

No matter what your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key.

Image credit: Sergei Golyshev, Flickr