Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN)

Achillion Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes anti-infective drug therapies in the United States and internationally. It focuses on developing combination therapies for the treatment of chronic hepatitis C (HCV) infection and resistant bacterial infections. The company’s drug candidates for treating chronic HCV infection comprise Sovaprevir, a NS3/4A protease inhibitor, which has completed a Phase IIa clinical trial; ACH-3102, a NS5A inhibitor that is in Phase IIa clinical trial; ACH-3422, a NS5B nucleotide polymerase inhibitor, which has completed preclinical studies; and ACH-2684, a NS3/4A protease inhibitor that has completed Phase Ia and Ib clinical trials. It has a license and development agreement with Ora, Inc. for the development and commercialization of ACH-702, an antibacterial drug candidate that is delivered topically or locally.

Take a look at the 1-year chart of Achillion (Nasdaq: ACHN) with added notations:

1-year chart of Achillion (Nasdaq: ACHN)

After trading between $2 and $4 from October through May, ACHN shot up to hit a new high of $8.50 in June, and then sold off into July. Since that time, the stock has rallied back up to the $8.50 resistance (red) and appears to have now formed the cup (blue) portion of a potential cup and handle pattern. Regardless if the stock forms the handle or not, the stock should be headed higher if it breaks through resistance.

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The Tale of the Tape: ACHN may have formed the cup in a C&H pattern. A long trade should be entered on a breakout above the $8.50 level with a stop placed under that 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