Gilead Sciences Coronavirus Treatment News Could Lead to Key Upside Breakout

Gilead Sciences (GILD) is up sharply this Monday morning after the company formalized an agreement with Chinese authorities to study the effectiveness of an experimental Ebola and SARS treatment on patients infected with the coronavirus. Trials for the drug will be conducted in Wuhan, the central Chinese city that is ground zero for the current outbreak.

Let's check out the charts of this company.

In the daily bar chart of GILD, below, we can see that prices opened sharply higher Monday but have moved down to the lows (so far) of the day. Prices had broken above the highs of December and September but where they close is more important to technical analysts and investors.

Prices are above the bottoming 50-day moving average line the bottoming 200-day moving average line. Despite the pullback from the opening strength a price gap or void is still visible and speaks to the power of the buying Monday.

The On-Balance-Volume (OBV) line should jump up Monday but it had been trending lower over the past month. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside for a cover shorts buy signal. 

In the weekly bar chart of GILD, below, we can see the price action over the past three years but not Monday's activity. Using your imagination we can imagine that prices pushed over the highs of December but the June high of $70 has not been broken. Assuming that prices stay above the bottoming 40-week moving average line the chart will look stronger.

The weekly OBV line has tried to move in a positive direction the past year and the MACD oscillator has been bumping around just under the zero line. Fresh price strength now could go a long way to pushing the oscillator above zero for a buy signal.  

In this daily Point and Figure chart of GILD, below, we can see that the software can generate a potential upside price target of $78, which would be a breakout over the resistance around $70. 

In this weekly close-only Point and Figure of GILD, below, we can see a potential longer-term price target in the $82 area.  

Bottom-line strategy: I don't have an idea of how important the latest company news is for Gilead's bottom line but the charts become much more bullish on a close above $70. Traders could nibble on the long side of GILD Monday but wait for a close above $70 before getting aggressive. Our longer-term price target is $82.

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