This biotech gigant has likely bottomed

Early Dec last year, I was betting for a good response to the results of an important clinical trial on Alzheimer's Disease from the biotech giant, Biogen (BIIB).  While the initial response was indeed very positive, it quickly faded during the day and closed lower. What a disappointment!! I bet with naked puts for the event and obviously was not a very successful one. But due to the nature of the naked puts with relatively low risk, I actually came out with some profit although not as much as I'd have hoped for.  Since then, BIIB has basically gone now where with sideway moves. A couple of days ago, BIIB reported its earnings, which was rather disappointing due to weak forward guidance. Usually this should be a very strong selling trigger and initially it did drop like a stone. But amazingly, the next day it not only recovered from the overnight selloff, it actually bounced back strongly with a nice gain at closing. When a stock dose not negatively respond to poor news, it is a very strong signal that it has bottomed as those who wanted to sell have already sold. This is a typical bottoming sign.


Now more technically, BIIB actually has formed a gigantic bull flag. It is currently sitting on a strong support line and at the bottom of the flag. Virtually it has about 50 points long from bottom to top. If it's indeed bottomed, logically it should move up towards its top line around $330. If that is pieced through, then the flag pole length will come into play to expect how much higher it can further go, probably another 50+ points. So potentially BIIB is poised for a quite significant move in the months ahead. Of course, no guarantee this will play out as expected but the potential is there. One possible catalyst for its up movement is a potential M&A. BIIB has a lot of cash in hands and has been greatly criticized for not using the money to buy some good assets to boot its pipeline. I think it is under a good pressure and may be actively looking for doing so. No one know if and when it may do it but a deal may be already in progress.