Incyte Corporation (NASDAQ: INCY)

Incyte Corporation, a biopharmaceutical company, focuses on the discovery, development, and commercialization of proprietary small molecule drugs primarily for oncology and inflammation. The company markets JAKAFI, an oral janus associated kinase (JAK) inhibitor for the treatment of patients with intermediate or high-risk myelofibrosis (MF), including primary MF, post-polycythemia vera MF, and post-essential thrombocythemia MF. Its product pipe line includes ruxolitinib, a JAK inhibitor, which is in Phase III clinical trial for polycythemia vera; in Phase II trial for pancreatic cancer; and in Phase I trial for the treatment of malignancies, as well as baricitinib, a JAK inhibitor, which is in Phase III trial for rheumatoid arthritis, in Phase IIb trial for psoriasis, and in Phase II trial for diabetic nephropathy.

To review potential trading opportunities with Incyte’s stock, please take a look at the 1-year chart of INCY (Incyte Corporation) below with my added notations:

1-year chart of INCY (Incyte Corporation)

A rounding top is a reversal pattern that is as simple as it sounds: After an extended rally, a stock “rolls over” from the left to right by the formation of low peaks to higher peaks back down to lower peaks. The top that is formed looks somewhat like an upside down “U”.

INCY appears to have formed a rounding top price pattern (blue) from the beginning of the year until the end of last week. As with any price pattern, a confirmation of the pattern is needed. INCY confirmed its pattern by breaking the $60 support (red) that was created by the rounding top pattern.

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The Tale of the Tape: INCY has broken down from its rounding top and should be moving lower overall. A short trade could be made on any rallies back up to the $60 area, while a long trade could be made if the stock were to break back above the $60 level.

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

Follow me on Twitter: @cmtstockcoach