Pharma Stocks in Focus Amid Trump's COVID Fight

Just as many thought the race to the White House couldn't get any more chaotic, President Donald Trump tweeted early Thursday morning that he and First Lady Melania Trump had tested positive for coronavirus. The stunning development, just 32 days out before voters head to the polls on Nov. 3, was followed by news that the 74-year-old president would spend a stint at Walter Reed National Military Medical Center where doctors will closely monitor his condition.

Key Takeaways

• President Trump is taking experimental drugs manufactured by Regeneron Pharmaceuticals, Inc. (REGN) and Gilead Sciences, Inc. (GILD) to fight COVID-19.
• Traders should watch for a breakout from an ascending triangle on Regeneron's chart.
• Watch for buying opportunities in Gilead shares near $162, where the price finds crucial support from the lower trendline of a falling wedge and a multi-year horizontal line.

Over the weekend, the president's physician Dr. Sean Conley confirmed that Trump was taking experimental drugs from biotech giants Regeneron Pharmaceuticals and Gilead Sciences. Below, we take a closer look at both companies and how their COVID-19 treatment works. We'll also point out important technical levels to watch as the world's highest-profile coronavirus patient uses the companies' medications to battle the deadly disease.

Regeneron Pharmaceuticals, Inc. (REGN)

New York-based Regeneron Pharmaceuticals manufactures and commercializes medicines for treating various medical conditions. President Trump is taking the biopharmaceutical company's dual monoclonal antibody treatment REGN-COV2. The drug works by binding antibodies to the coronavirus' spike protein, limiting the ability of viruses to escape. Put more simply, the therapy tries to speed up the body's immune system in readiness to fight the disease at its onset. Although still in the experimental phase with fewer than 300 people having received it, the drug has shown promising results in clinical trials and is available on compassionate grounds if approved by the Food and Drug Administration (FDA). As of Oct. 5, 2020, Regeneron stock has a market capitalization of $60 billion and is trading 50% higher year to date. Over the past three months, the shares have fallen by 9%.

Price has oscillated within an ascending triangle throughout most of September, with neither the bulls nor bears able to gain control of the action. If the stock breaks above the pattern's upper trendline, look for a retest of the all-time high at $664.64. Alternatively, if the shares break down below the triangle, keep an eye on the $516 level, where price finds a confluence of support from a key horizontal line and the 200-day simple moving average (SMA).

An ascending triangle is created by price moves that allow for a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. Traders often watch for breakouts from triangle patterns.

Gilead Sciences, Inc. (GILD)

Gilead Sciences develops and markets therapies to treat life-threatening infectious diseases. Doctors said Saturday that the president was also on a five-day regimen of antiviral drug remdesivir – the biotech's broad-spectrum antiviral medication that has shown to help some COVID-19 patients make a faster recovery. Researchers believe that remdesivir works by interfering with the mechanism that certain viruses use to replicate themselves, providing the patient takes the medication early. Currently, the FDA has only approved remdesivir for emergency use in the United States to treat patients in hospital with severe COVID-19 symptoms. Trading at $62.17 and offering a healthy 4.3% dividend yield, Gilead Sciences stock is flat on the year and has slumped nearly 18% since early July as of Oct. 5, 2020.

Active traders should look for buying opportunities at the $62 level, where price finds crucial support from the lower trendline of a falling wedge and a multi-year horizontal line. Furthermore, the relative strength index (RSI) sits near oversold territory, increasing the likelihood of an upside reversal in this area. Those who take a trade here should place a stop-loss order under the 2019 low at $60.89 and book profits near significant overhead resistance at $70.

A falling wedge is a bullish reversal pattern that contracts as prices move lower. The pattern forms a cone shape that slopes down as the reaction highs and reaction lows converge.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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