Trend Structure Breakouts and Lessons from Gilead GILD

Feb 25, 2014: 10:04 AM CST

We tend to focus on “Strong Stocks Getting Stronger” for potential swing trading candidates to trade (or hold), and a reader recently brought Gilead Sciences (GILD) to my attention.

Let’s take a look at the trend structure (a beautiful “arc” pattern), learn a few trading lessons, and discuss the current chart landscape for strong stock Gilead Sciences.

We’ll start with a chart of the “Arc Trend Structure” currently in motion:

Gilead Sciences GILD Arc Trendline Arc Trend Structure

We can see a cycle in motion of Accumulation or the “Life Cycle of a Stock Move” starting with the flat range period through 2011.

Gilead shares broke out impulsively – a “Kick-off” initial trigger – above the $25.00 level in early 2012 which ignited the impulsive, powerful trend move from $25.00 to the current $85.00 level of today.

From there, a stable “Arc Trendline” developed until shares went Parabolic and violently retraced from the $60.00 level down almost to $45.00 – a 25% move in a few months.

Not to be outdone, buyers continued the campaign of accumulation, accelerating the broader trend in motion that led to two additional breakout events as highlighted.

Note the increase in volatility as seen in the 3/10 Momentum Oscillator – the trend has moved to a less stable structure than at the beginning, which warrants more caution instead of outright bullishness.

Let’s drop to a closer inspection of the Daily Chart to discuss what’s happening now:

GILD Trend Structure Daily Triangle Breakout Relative Strength

We see the most recent impulsive pro-trend breakout event that triggered in October 2013 on the breakthrough beyond $65.00 per share.

From there, an Ascending Triangle price pattern developed, culminating in the recent January breakout opportunity.

A retracement to the apex of the triangle – and the confluence support of the trendline, rising 50 day EMA, and the lower Bollinger Band – allowed for an aggressive pro-trend retracement support entry that was successful (it had a tight stop if the trend reversed instead of continuing).

We now trade to all-time highs into $84.00 per share on lower momentum and volume in the context of a fully developed (mature) trend.

Caution is indeed warranted, but the trend structure (sequence of higher highs and higher lows) remains a confirmed bullish multi-timeframe trend.

Gilead (GILD) offers additional lessons in terms of breakout and retracement entries into an accelerating trend.  Watch the current price and EMA levels for reference and additional possible swing and intraday opportunities.

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Corey Rosenbloom, CMT
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