Technical Analysis: Rexahn Pharmaceuticals

Feb. 8.11 | About: Rexahn Pharmaceuticals (RNN)

By M.E. Garza

Yesterday, we issued a technical trade alert for Rexahn Pharmaceuticals (NYSEMKT:RNN) to our subscribers. Are prices headed higher for RNN? This afternoon, we will issue a fundamental analysis report on the stock, but let's start by taking a look at key technical analysis data this morning, in case prices continue to break-out higher as anticipated.

On Monday, we spotted a trend in which the shares had been trading with a range inside a rising channel pattern. As predicted, the share price moved to the top of the trading channel- providing our readers with an excellent opportunity to make a good trade based on technical analysis.

After we first reported the possibilities of a partnership with big Pharma last year, Rexhahn's management walked away from a $20 million dollar up-front deal with $1 billion in milestones being offered by one of six pharmaceutical companies. The company and their financial advisors opted, instead, to raise just enough money to take their drug candidate through Phase IIb -- after which they will re-visit those offers armed with more data.

A full fundamental analysis report including all of these facts, and many more will be publshed this afternoon. For now the stock continues to trade higher than where we alerted our subscribers about it and we continue to believe that it is headed higher.

On February 3rd the high of the day pierced the 3-day high of $1.51 on volume of 757,000 shares last week. At that point, they issued an alert saying that shares of RNN were expected to trade within a new higher trading range with support at $1.51 and move along with its peers in the biotechnology industry.

If prices head higher now that shares have pierced resistance at the high of the trading channel which we identified, then prices could be headed higher. In addition, a "Golden Cross" may be forming on the stock chart:

Click to enlarge

As we've discussed in the past, there is a lot to be said about the 50/200 day moving averages on a daily stock chart because this is one of the most commonly overlooked, yet accurate technical leading indicators. It is simple but proven and should be watched with a disciplined eye.

The Golden Cross occurs when the 50-day moving average crosses above the 200-day moving average. That is when the stock most often begins a bullish mode as its price continues to rise. The indicator comes down to two relatively simple to learn concepts:

  • Bearish: When the 50-day moving average dips beloow the 200-day moving average. This could be the beginning of a downward trend and would be very cautious about buying, possibly sell if profit has already been made.

  • Bullish: When the 50-day moving average passes through (rises above) the 200-day moving average. This could be the beginning of a upward trend that may be sustainable and possibly signals a buy at that point.

As long-term indicators carry more weight, the Golden Cross indicates a bull market on the horizon and is reinforced by high trading volumes -- which is certainly the case with RNN. Additionally, the long-term moving average becomes the new support level in the rising market.

Click to enlargeDisclosure: Long RNN