After rough October and November months, Biotech (XBI) finished the year on a high note, back up towards yearly highs.
Thursday, one of its constituents looks like a great buy - Celldex Therapeutics CLDX. This Biotech stock has a strong technical set-up in daily and weekly time-frames, and has huge potential upside.
CLDX hasn't been great since October, but through its pull-back and lengthy consolidation phase, the stock has established strong support at $22. It has tested and held on multiple occasions, which is encouraging moving forward as it gives a clear stop level at $21.64 (downside risk of 10.83 percent).
On a weekly basis, CLDX is a clear pennant pattern, and basic technical analysis suggests that the stock will break the direction that it entered the formation - to the upside. The even better news here is that CLDX has big-time upside. The stock hit weekly highs just north of $38 back in October which is roughly 56 percent from current prices (not a typo!). More recently, the stock looks to be trading a range from about $21.64 - $29.50, so playing for a move to the top of the range is likely the better bet. From current prices to $28.95 (just below heavy resistance) still nets a gain of 19.1 percent, which is still quite a large gain for a short-term swing trade!
CLDX is entering the overbought stochastic for just the second time in three months, which is a sign that buyers are starting to step in again. The stock looks primed for a run higher after holding critical support at $22, and the reward to risk ratio is about 2 : 1. If you're looking for a bold swing trade to kick off 2014 right, look no further than long CLDX.
When to Consider Entering the Trade:
At the current price (~$24.30).
When to Consider Exiting the Trade:
At a close below $21.64 (Breakdown) / An intraday price of $28.95 or above (Profit-Taking)
Disclosure: At the time of publication the editor and affiliated companies own the following positions: None
Note: Positions may be bought or sold while this publication is in circulation without notice.
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