Aegerion Pharmaceuticals, Inc., a biopharmaceutical company, develops and commercializes therapies for patients with debilitating rare diseases in the United States. The company’s products include JUXTAPID (lomitapide) and LOJUXTA (lomitapide) hard capsules, an adjunct to a low-fat diet and other lipid-lowering treatments in patients with homozygous familial hypercholesterolemia. It also has the right to use lomitapide in the field of monotherapy or in combination with other dyslipidemic therapies for treatment of patients with other severe forms of hypercholesterolemia. The company distributes its products directly to patients and other purchasers through a specialty pharmacy.
Take a look at the 1-year chart of Aegerion (NASDAQ: AEGR) below with my added notations:
AEGR has trended consistently lower for the entire last year. Over the last four months the stock seems to be forming an inverse head and shoulders pattern (gray). I have noted the head (H) and the shoulders (s) to make the pattern more visible. AEGR’s neckline resistance is at the $35 level (blue) and the stock would confirm its H&S pattern if it breaks up through that resistance.
Lastly, keep in mind that simple is usually better. Had I never pointed out this inverse H&S pattern, one would still think this stock is moving higher simply if it breaks through the $35 resistance. In short, whether you noticed the pattern or not, the trade would still be the same: On the break above the key $35 level.
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The Tale of the Tape: AEGR seems to be forming an inverse head & shoulders pattern. A long trade could be entered on a break above the $35 level with a stop placed under that level. A break below the common $30 support most likely means much lower prices, thus the opportunity to enter a short trade.
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach