While flipping through my charts of the Nasdaq-100, I noticed that Immunex (IMNX) might be getting ready to make a run.
Immunex Daily Chart
For the past four months Immunex has just been meandering between $14 and $19, forming a nice little sideways channel. Since I first read Stan Weinstein's How to Profit in Bull and Bear Markets way back when, this has been one of my favorite chart patterns. It doesn't have the panache of Gann or Fibonacci, but is a nice pattern nevertheless. The basic interpretation is that after a sharp decline a stock goes into consolidation mode until the company works out its problems. Once the company gets back on track, the stock breaks out on heavy volume. This pattern allows for a purchase on a breakout for more aggressive traders, or on a pullback for more conservative traders. Immunex has broken above $19 today, perhaps on news that its Enbrel rheumatoid arthritis drug will one of the biggest growth drugs of 2002, but volume will need to pick up for confirmation. Should this prove to be a false breakout, the 50-day moving average has done a good job of support pullbacks over the past two months.
Immunex Point and Figure Chart
Immunex's point and figure chart also looks encouraging. In August IMNX gave a quadruple top buy signal, breaking the bearish resistance line in the process. The bullish price objective off of that buy signal was $26.50, but that target was cancelled by a sell signal giving during last week's sell off. IMNX quickly rebounded, and has given yet another quadruple buy signal at $19. The new preliminary bullish price objective is $26. (Number of Xs * box size * bullish multiplier) + column low = bullish price objective. (6 * .50 * 3) + 17 = $26. This target is only preliminary since the number of Xs could continue to grow, increasing the bullish price objective.
Shares of Eli Lilly might be ready to pull back
I've had my eye on shares of Eli Lilly (NYSE:LLY) for the past couple of days as a potential short/put candidate and today might be the day that marks a short-term reversal for the stock. I was somewhat surprised that LLY got hit as hard as it did on September 17th when we resumed trading. The stock got pushed down to the $72 level and this is somewhat unusual for a more "defensive" stock. The recent rally back up to $81 and bearish resistance offers the bearish trader a favorable risk/reward trade. A trade at $78 would have the stock reversing three boxes on our point/figure chart and could have the stock picking up some steam short-term to the $75-$76 level.
Eli Lilly - $1 box
Today's trade at $81 looks to have found some selling as we were watching the stock closely in the "market monitor" on LLY. The risk/reward for an aggressive trader with a stop just above today's high of $81.34 was rather attractive, with some downside potential to the $75-$76 level. Should the markets get "less defensive" in coming sessions, this stock could see money rotate out of it as those that previously been looking for a "safe haven" move onto other stocks.