After multiple rally attempts in 2022, is this time different? BioMarin Pharmaceuticals is just one piece of mounting evidence suggesting we are looking at more than just a bear market rally, and BMRN stock just might be a leader.
Leaders Refuse To Give Up Ground
After the October low, a lot of beaten down stocks climbed from deep bases. BioMarin Pharmaceuticals looked different. It was trading in 52-week high territory in August and formed a double-bottom base that was only 18% deep. Its climb from the bottom saw a 36% gain (1), proof that BMRN stock was capable of a strong move.
When looking for swing trading setups, stocks that refuse to give up much ground tend to get our attention. BMRN fit the bill. In its 11-day fall to its 21-day line, it only gave up 8.3%. Volume was light on the pullback, surely due to the holidays, but still picture perfect. Plus, the S&P 500 had an eight-day drop of 8.2% at nearly the same time. BMRN stock held up well compared to the broader index. This quality is often found in leading stocks.
BMRN Stock Is Early Out Of The Gate
Another quality of leading stocks is they tend to be first out of the gate in a new rally. That was certainly the case for BMRN stock. It bounced up strongly from its 21-day line and clearly broke the trend line of its mild slide (2). Volume was especially heavy compared to recent activity and the relative strength line was hitting recent highs well ahead of the price. That was enough to earn it a spot on our SwingTrader product.
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Even more impressive, the strong move was before the indexes were showing strength. The follow-through day for the indexes came two days later and by that time we were up 2.5% from our entry (3). As usual, we took our first third of the position off to lock in profits.
With so many trends getting cut short in 2022, we kept to a policy of taking profits quickly. Once we hit 5% profit, we booked the profits on another third of the position (4).
The Comeback After The Shakeout
We had a 9.4% gain from our entry on BMRN stock when it reversed (5) and started pulling back. This pullback was even milder with just under a 5% drop (6). We exited our remaining position because BMRN stock broke below its 10-day moving average line. But unlike a lot of 2022, the pullback stopped there. As indexes continued to rally and notched multiple subsequent follow-through days, BMRN stock also found itself back at 52-week highs (7).
As opposed to pullbacks getting deeper and leading to bases, many stocks are finding support and coming back to make bigger gains. It makes stocks like BMRN stock worth watching for new opportunities.
One may be coming depending on how the latest pullback handles itself around its 21-day moving average line (8). While we nabbed a nice 4% gain for the trade in just two weeks, nothing prevents us from getting more gains on another attempt. With pullbacks staying mild and rebounds becoming more frequent, it's another sign that this rally is shaping up differently than the rallies of 2022.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
