Scanning US stocks for trading this morning, I noticed some positive signals of technical analysis at Questcor Pharmaceuticals stock charts. Shares of the biopharmaceutical company are trading for $37, although QCOR stock had been a 5-dollar stock back in 2009! The stock was up 3.27% in yesterday’s trading session, overcoming this week’s high. Questcor Company’s operating margin for 2011 has been almost 52%, employing 206 people while their primary product is H.P. Acthar Gel; an injectable drug that is approved for the treatment of 19 indications. Doral, a drug that is indicated for the treatment of insomnia is another product of Questcor Pharmaceuticals. Since QCOR stock has entered an uptrend in 2010 and increased its share value 9 times by the end of 2011 (!!), following the trend sounds like the best trading strategy!
After QCOR stock’s impressive gain in late October, when the stock opened 4 dollars higher than previous day’s close forming a gap, Questcor shares hit new highs and finally found resistance at $46. First days of 2012 weren’t that good for Questcor shareholders, as the stock lost about $10 in a week with substantially increased volume of traded shares, especially on 11th of January, which was the worst trading day for QCOR stock this year. However that short-term downtrend can be interpreted as filling the previous gap according to technical analysis. The stock retraced back to the previous resistance level at $33 which would now act as a new support level. QCOR shares then moved slightly upwards, breaking the resistance found at the daily chart ($38) and overcoming the 50-day moving average.
Yesterday’s candlestick was an optimistic move indicating a new higher low after the gap fill. The new low can be used to set a tight stop loss; otherwise a looser stop loss can be placed right below the strong support level at $33 for a $4/share risk. Profit target is obviously going to be the previous all-time high ($46) of Questcor stock, winning $9/share for a 2.25 reward/risk ratio. However a double top formation might not be the case for QCOR stock, therefore traders should gradually move their stop loss up and secure profits as the stock prediction comes true. Stock traders should pay attention not to get trapped in a sudden retracement to monthly moving averages, since Questcor stock has been trending upwards for two consecutive years and buyers may look to close their profitable positions at any given price, should any bad news hit the market. For the time being though, trend is your friend and trend following has always been a fine trading strategy.