For patient Gilead investors, the stock is a buy on weakness in the near term.
Tuesday's news-inspired ramp pushed Gilead above a major support zone. This key area, which was slightly violated during the previous two days of Brexit selling, includes the stock's January, February and May lows as well as an upward-sloping 40-week moving average. With shares now firmly back above this zone, the stock should be considered a low-risk buy between $82 and $78. A close back below $78 would violate Monday's low and destroy yesterday's bullish action.
In addition to the recovery of major support on heavy volume, Gilead is also working on a bullish divergence in its weekly moving average convergence/divergence indicator. This divergent action has been in place since the March low and will take on an much more positive set up if Gilead can finish off this week with a close above last week's high of $84. With a little follow-through to Tuesday's big gain, the stock should easily challenge that level.
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