This BioTech Stock Going Even Higher
This article was originally published on this site
Quite some time has passed since I updated my views on Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) stock. My original views were published on August 30, 2016, and were titled “Penny Stocks: This Penny Stock Has Explosive Upside Potential.” In that publication, I outlined the reasons why I believed CRBP stock was set to appreciate. These views ended up being spot on, and anyone fortunate enough to participate in Corbus stock was handsomely rewarded.
CRBP is a small-cap biotech stock, and this sector has its privileges along with its inherent risks. Small-cap biotech stocks are heavily reliant on clinical trials. A positive clinical trial results in windfall profits, while a negative clinical trial results in steep losses. I based my bullish opinions by examining the indicators and price action that were generated on the CRBP price chart. It is my belief that the price chart was indicating that the clinical results would be positive, and subsequent positive trial results were not a surprise.
The following stock chart illustrates the indications on the original CRBP stock chart that produced my original bullish view.
Chart courtesy of StockCharts.com
In early 2016, there were indications that a bottom was being put in place. This bottom was confirmed in March after a double bottom pattern was completed. A double bottom is a technical pattern that contains two consecutive lows that are separated by a peak in between. The pattern is confirmed when price closes above the peak. A confirmed double bottom indicates that the trend has reversed, and it is time to look for bullish indications that a rally is commencing.
These bullish indications came quickly as the price action that followed was healthy and constructive. Healthy and constructive price action consists of impulse waves that advance the price, and consolidation waves that alleviate overbought conditions as well as set up the next impulse wave. The chart above was littered with such price action, and there were no signs that the price action was going to abate any time soon.
The golden cross that was generated in April 2016 served to reaffirm the view that higher prices were set to prevail. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is in development.
All these indication supported the notion of a higher stock price, so I could only assume based on this notion that the news and clinical trials that followed would produce a positive result.
The following Corbus stock chart illustrates the developments that followed.
Chart courtesy of StockCharts.com
Following my publication, Corbus stock accelerated higher and attained a high of $10.78 on October 10, 2016. This represented a whopping 162% return in a matter of weeks. These highs that were attained were short lived, and the price has traded within a wide trading range. This trading range is now resembling a large consolidation wave, which means the trading action is constructive.
The following weekly chart paints a compelling picture that suggests another leg higher is a real possibility.
Chart courtesy of StockCharts.com
The chart above also illustrates healthy and constructive price action, but it uses a weekly scale in order to smooth out the trading action. The result of this smoothing is that there is a reduced amount of visible impulse waves and consolidation waves. The smoothing help put the recent trading range into scope with the price action that preceded it.
A completion of the consolidation wave that is currently in development would indicate that a new impulse wave is set follow, and that much higher prices can be expected. The indicator in lower panel labeled “MACD” is converging and the completion of the consolidation wave would coincide with a bullish cross.
MACD is an acronym for moving average convergence/divergence. This indicator uses signal-line crosses to distinguish between bullish and bearish momentum, and, as a result, it is a popular tool used by traders who instill a trend-following trading strategy. A bullish cross would suggest that the path of least resistance for CRBP stock is towards higher prices.
All the bullish indications that littered the price chart in my previous publication continue to persist, and I can only assume based on this notion that higher prices will prevail. This view of higher prices will most likely be fueled by bullish news and positive clinical results.
Bottom Line on CRBP Stock
I remain bullish on Corbus stock, because all the indications that initially supported this view are embedded and continue to mount. As long as these indications remain bullish, I can only assume that higher CRBP stock prices will follow.
