Could This Biotech Stock Fall Even Further?
Sometimes the stock market gets on a run and traders enjoy the ride.
The same can apply with individual stocks. Once the wind is at their backs, traders can take off and run to previously unforeseen heights.
However, all runs must come to an end eventually. The million-dollar question is, when?
This is where technical analysis can sometimes help.
Commonly, stocks getting ready to reverse lower or higher will give technical signs in the way of price action or momentum.
One biotech stock in particular that has done that is Agios Pharmaceuticals Inc (NASDAQ: AGIO).
From a technical standpoint, there are several warning signs at play on Agios.
The upward slope in general is worrisome. Stocks that start to accelerate upward in this fashion can often come crashing down. Unfortunately, it's difficult to see the end coming.
On Friday, Agios formed a common reversal candle known as a shooting star candle. After a big run-up, this type of candle often signals a reversal of some magnitude.
Most traders prefer to see their shooting star candles confirmed, which is often that of a lower close.
Over the course of Agios’ last three price peaks, the corresponding momentum peaks have been lower. This momentum divergence also tends to precede a decline of some measure.
Agios closed Monday at $96.27, down 4.5 percent.
Investors should conduct their own due diligence before investing in any stock.
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.