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Christian Tharp, CMT

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Five Star Biotech Stock Watch: Jazz Pharmaceuticals

When a company misses earnings, the negative news doesn’t always affect the underlying stock as expected.

This is why it is always important to do your homework on the stock, rather than just on the company.

Jazz Pharmaceuticals on May 9 missed analysts’ estimates. The stock dropped initially, but then mostly recovered throughout the trading day.

What’s next for the stock? Will the company’s earnings miss cause a continued decline for the stock? Or will it rebound further?

The company: Jazz Pharmaceuticals

Ticker Symbol: (NASDAQ: JAZZ)

Sector: Healthcare

Industry: Biotechnology

Jazz Pharmaceuticals identifies, develops and commercializes pharmaceutical products for various medical needs in the United States, Europe and internationally.

Related: Breaking Biotech: Gilead Sciences Phase 2 Results

Take a look at the one-year chart of Jazz Pharmaceuticals below with added notations:

Over the past six months, Jazz has formed a key price level of $120, which is highlighted on the chart above. This is the same level that the stock bounced off of on after the company's earnings release last week.

Jazz has also created a trendline of resistance beginning from its peak in February and it was most recently tested just a week ago.

So, Jazz’s future direction should be dictated by the break of one of the two levels highlighted on the chart.

The stock closed Tuesday  at $128.84.

Related: Five Star Stock Watch: Tesla Motors

Jazz Pharmaceuticals isn't set to release earnings again until August 2014.

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.

Posted in: Earnings Education Long Ideas Short Ideas Technicals Trading Ideas General