Don't Ignore This Chart!

Biogen Inc (BIIB) Suffers Massive Breakdown

Tom Bowley

Tom Bowley

Chief Market Strategist, EarningsBeats.com

There are pullbacks in uptrends and then flat out trend reversing breakdowns.  We never know for sure which is which until history plays out.  But Biogen's (BIIB) massive selling on Friday has all the makings of the latter.  Any time a company rises more than ten fold in less than five years, it's generally due to very strong core growth.  The one thing investors do NOT want to see is the cutting of growth forecasts.  That's what BIIB did on Friday when they released their latest quarterly results, cutting their revenue forecast from 14-16% growth to just 6-8%.  BIIB was valued for much stronger growth and Friday's announcement sent a shock through its stock and several of its peers.  Trendline support, which held for 5 years was lost on Friday and volume soared to its highest weekly volume since 2010.  BIIB is also one of the top holdings of the IBB (biotech ETF), which has been flashing a negative divergence on its weekly chart this summer.  While a short-term bounce cannot be ruled out, I'd be careful expecting too much out of BIIB given the significance of the breakdown on Friday.  Look at the trendline breakdown:

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More