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Celgene Is Up 22% Over The Past Month; What Do Technicians Think?

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Celgene Corporation (NASDAQ: CELG) shares scared some of the longs out of their trades during the October "bottoming process."

They missed out on a 30 percent run in just a few weeks. That rally, however, took Celgene shares up to the upper edge of a long-term uptrend channel at just under $110.

What's next?

What The Bulls See...

• A reasonable P/E of 24 when compared to the 2015 estimated growth in revenues and EPS of 20.8 percent and 32 percent, respectively

• A 21.8 percent net profit margin that spins off over $1.6 billion in levered free cash flow annually

• A current ratio of 6.32, indicating good short-term financial health

What The Bears See...

• A debt-to-equity ratio of 118.53, which could be troublesome to some investors and attractive to others given the low cost of borrowing these days

• A price-to-sales ratio of 11.78

• A price-to-book ratio of 12.69

The Technical Take

Technicians note that Celgene shares, up to this point, have shown extraordinary relative strength versus both the biotechnology sector as well as the broader market.

Related Link: Gilead Sciences In Correction Mode

That being noted, however, they do point out that the upper edge of the current uptrend channel is being tested for Celgene, and the odds would favor the stock pulling back to consolidate some of the recent gains before progressing much higher.

The initial two pullback targets appear to be be $104.02 –- a recent downside pivot point -– and $97.30 -– the previous all-time high.

Once the stock pulls back and sets a new floor, technicians believe it could make a run back up to the upper edge of the channel once again, near $110 or $115.

Stock chart: 
Stock chart

Posted-In: technical analysisTechnicals Trading Ideas


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