InterMune, Inc. (NASDAQ: ITMN)

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InterMune, Inc., a biotechnology company, engages in the research, development, and commercialization of therapies in pulmonology and orphan fibrotic diseases. The company focuses on therapies for the treatment of idiopathic pulmonary fibrosis (IPF), a progressive and fatal lung disease. It markets Pirfenidone, an orally active small molecule drug for the treatment of adults with mild to moderate IPF under the Esbriet name in the European Union. The company’s Pirfenidone is also in Phase III clinical trials for the treatment of IPF in the United States. In addition, it offers Pirfenidone under the Pirespa trade name for the treatment of IPF in Japan; Pirfenex trade name in India; and Shanghai Genomics in China. InterMune, Inc. was founded in 1998 and is headquartered in Brisbane, California.

To review InterMune’s stock, please take a look at the 1-year chart of ITMN (InterMune, Inc.) below with my added notations:

1-year chart of ITMN (InterMune, Inc.)

After selling off from March until August, ITMN has tried to form a base while consolidating within a rectangle during the most recent (2) months. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For ITMN, the rectangle pattern has formed a $10 resistance (navy), which was also a prior support level, and an $8 support (red).

The Tale of the Tape: ITMN has formed a rectangle pattern. The possible long positions on ITMN would be either on a pullback to $8, or on a breakout above $10. The ideal short opportunity would be on a break below $8 or at $10.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT