When a sector rises over 40% in a single year or a stock appreciates over 400% in just 2 years, like Gilead Sciences, Inc. (NASDAQ:GILD) did, then it gets very tough to stop the word “bubble”. There is a fear of bubble formation in the biotechnology sector and every single day of rise is perpetuating the fear anew, but the stocks may rally much more from the current levels. Yesterday stock took a dive in the opening hour to register a 2-month low but managed to recover over 2% to make the close as flat as possible with a loss of only 0.42%. The daily candle took the form of a Bullish Hammer, with a lot of upside potential.
Gilead Sciences, Inc. (NASDAQ:GILD) have a monopoly in the Hepatitis C treatment market as it is the maker of the blockbuster drugs Sovaldi and Harvoni, with a combined sale of $12.4 billion last year. The company had acquired Pharmasset for $11.2 billion in 2012, getting a deep bench of precious drugs including Sovaldi. Harvoni is a combination of Sovaldi and the NS5A inhibitor ledipasvir. These two drugs are thought to have revolutionized Hepatitis C treatment.
Naturally the revenue of the company has increased by 122% in the last year and the growth prospects look very strong going forward. The market is still feeling a bit nervous after the 7% correction of the sector in the last few days. Technically, the stock is in a very strong position and the last session’s price action implies that it may be ready for an explosion on the upside and a new life high.
The chart shows that the price has taken support from the lower boundary of the long term channel. A break above $105-$108 will confirm a breakout from the Triangle pattern seen on the charts and initiate a rally for $130 levels.