Agios Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the development and commercialization of therapeutics in the field of cancer metabolism and inborn errors of metabolism (IEMs) in the United States. Its product candidates include AG-221, an oral inhibitor of the mutated isocitrate dehydrogenase (IDH) 2 protein for the treatment of patients with cancers that harbor IDH2 mutations, as well as for the Type II D-2 hydroxyglutaric aciduria treatment; and AG-120, an oral inhibitor of the mutated IDH1 protein for the treatment of patients with cancers that harbor IDH1 mutations. The company is also developing AG-348, an oral small molecule activator of PKR enzyme for the treatment of patients with pyruvate kinase deficiency.
Take a look at the 1-year chart of Agios (Nasdaq: AGIO) with the added notations:
From March thru mid-September AGIO repeatedly stalled at $50 (blue). Finally, the stock broke through that $50 on a massive increase in volume. After hitting resistance at $70 the stock has fallen into what is known as a flag pattern. The pattern gets its name from the appearance of a “flagpole” on the breakout, and a small pennant formation after. This type of price action usually implies a break higher, but is certainly not a guarantee.
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The Tale of the Tape: AGIO is consolidating within a flag pattern. A break above $65 should lead to higher prices, thus a long trade could be made, and a break below $60 should lead to lower prices and a short opportunity.
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