[Post Summary]All rivers run into the sea, yet the sea is not full
—Ecclesiastes
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Here's insightful technical analysis on trading in the stock of Celgene (NASDAQ:CELG). CNBC's Jim Cramer covered this company during his Mad Money show on January 15, 2009.
Jim's technician at TheStreet.com indicates Celgene is a sell. Yet according to Cramer, the company's fundamentals suggest Celgene is a buy.
So, what are the Relative Strength Index (RSI) and volume indicating about the future trade in Celgene?
What possibilities does Elliott Wave analysis present?
Let's take a closer look...
You see the green trend line. That has the technical analyst at TheStreet.com concerned.
Relative Strength Analysis:
Following last year's new, all-time high in CELG ... coinciding with RSI diverging from its peak set in 2007 (a divergence indicated underlying weakness) ... relative strength has been decidedly to the sell-side (below 50) ... having fallen quite steeply (that is relative to the rather tame decline in CELG) ... and now is holding up ... on the verge of diverging from its late-2007 trough. All things suggest CELG is in strong hands.
Volume Analysis:
You have to like how volume during the current decline in CELG is contracting ... relative to its spike in late-2007. This suggests selling exhaustion. There are fewer holders who wish to sell their shares ... and that's usually a good thing. At least it turned out that way following the 2001-2002 sell-off.
Elliott Wave Analysis:
Considering Celgene's advance from 2002, there appears a case to be made a 5-wave Elliott "impulse wave" is forming. The first three waves were completed by 2007. The fourth wave is forming. RSI configuration supports this view. RSI weakening during the past year's sideways trading (versus late-2004) is typical 4th wave behavior. Once wave 4 has completed (and this end might be near), wave 5 should carry CELG to a new, all-time high.
Conclusion:
There might be another 20% taken out of CELG ... but if you are fundamentally interested in owning this stock, you might consider a buy program attempting to average your buy-in cost.
I agree with Cramer here. Prospects in the stock of Celgene look good. What's more, CELG has a floor under it at around $40. Seeing this you have a practical basis for setting stop losses. If Celgene falls through the floor, you want to get out because this would defy sound, technically-grounded, expectations.
There's no perspective like this available on the web ... free of charge.
One thing you should keep in mind, too. As goes the stock market, so go 90% of all stocks that make up the stock market. You are well-advised to stay ahead of the curve...
—Tom Chechatka
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