Biotech stock Gilead Sciences (GILD) is currently in the midst of a nice little hot streak, having only turned in one negative session thus far in June. However, this bounce has taken GILD to a trendline that should give investors pause, if past is precedent.
Diving right in, Gilead Sciences stock has run up to within one standard deviation of its overhead 160-day moving average, after spending a considerable amount of time below the trendline. According to Schaeffer’s Senior Quantitative Analyst Rocky White, the last three times GILD tested resistance at this trendline in the past three years, it went on to average a drop of 7.2%, one month later, and was lower all three times. At last check, the stock was up 1% to trade at $66.60, so a pullback of a similar proportion would put the stock around $62 — and back below its year-to-date breakeven level — by next month.
GILD has traded between the $68 and $62 levels for most of 2019. Longer term, the technical setup is even more grim, with the stock carving out a channel of lower highs since nearing the $80 level back on Oct. 3. Year-over-year, the shares have shed 7%.
The security could also face added pressure from a shift in analyst sentiment. That’s because of the 20 brokerages covering GILD, 65% rate it a “strong buy,” with zero “sells” on the books. Plus, the equity’s consensus 12-month price target of $79.97 is a nearly 20% premium to its current perch.
For those looking to bet on GILD’s next leg lower via put options, traders will be pleased to know that Gilead Sciences has a Schaeffer’s Volatility Index (SVI) of 24%, which ranks in the 22nd annual percentile, showing relatively low volatility expectations priced into near-term contracts.