Chronicle Journal: Finance

Alexion Pharmaceuticals Ready to Breakout?

An ascending triangle pattern has formed in the chart of Alexion Pharmaceuticals (ALXN). A breakout could occur. Learn how to profit off this potential trade.

An ascending triangle pattern has emerged in the chart of Alexion Pharmaceuticals (ALXN) and a breakout is expected soon.

ALXN specializes in developing and marketing drugs for rare, life-threatening medical conditions. Its blockbuster product, Soliris, is approved for a variety of disorders such as paroxysmal nocturnal hemoglobinuria, atypical hemolytic uremic syndrome, and generalized myasthenia gravis.

The company reported its latest financial results last month and beat estimates on both revenue and earnings. Revenue was driven by strong momentum in Soliris and its recent label expansions. Its next generation drug, Ultomiris, is also selling very well and is being evaluated for COVID-19 treatment.

ALXN had $2.3 billion in cash at the end of the third quarter. This was down from $2.9 billion in the previous quarter and below its long-term debt of $2.6 billion. Though the company has a healthy current ratio of 3.8.

The firm has a strong history of revenue growth with a five-year growth average of 18.5%. Sales are expected to grow 9.7% next year. The stock’s Price to Earnings ratio is 27.8, well below the S&P 500. Its Price to Book ratio is also relatively low at 2.4.

The stock has shown mixed momentum as it has been trending downward over the last month, but has shown stronger long-term momentum. ALXP is rated a “Buy” by our POWR Ratings system.

Take a look at the 1-year chart of ALXN below with the added notations:

  Chart of ALXN provided by TradingView

While climbing a clear trendline of support (green), ALXN has also formed an important level of resistance at $128 (red), thus forming an ascending triangle pattern.

An ascending triangle is a bullish pattern and we expect that ALXN will break the $128 level in the not-too-distant future.  Therefore a trader could buy ALXN after it suprasses $128 with the expectation of a breakout.

ALXN is trading between key resistance and trendline support. At some point, one of those lines will break and likely dictate the stock’s next, bigger move.

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Christian Tharpe, CMT

@cmtstockcoach


ALXN shares were unchanged in premarket trading Tuesday. Year-to-date, ALXN has gained 9.88%, versus a 15.84% rise in the benchmark S&P 500 index during the same period.



About the Author: Christian Tharp, CMT

Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock.

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