After a couple years of downtrending, shares of Innovus Pharmaceuticals (INNV) hit an all-time low at 2.8 cents in February. At that point, technicals and fundamentals collided. Bolstered by positive drug development news, the stock has rallied from the low, rising as high at 36.9 cents late in May to mark the highest point since October 2014. Across more than four months, the INNV chart has developed a strong uptrend by creating a series of higher highs and higher lows.
That said, let’s take a look at where the chart stands for the final week of June and what technical traders will look for going forward. As is usual, the stock has consolidated from the May high, pulling back as low as 12.9 cents before finding some buying pressure again.
Against the backdrop of a global market bloodbath on Friday at the hands of the so-called “Brexit,” shares of INNV actually gained 2.6% on the day. As such, shares continue to hold over their 50 day simple moving average (SMA, currently at $0.16) as well as far above their 200 day SMA (currently at 9.7 cents). Trending over these two closely watched moving averages is regarded as a bullish sign. This further goes along with the “golden cross” in May when the 50 SMA passed above the 200 SMA.
Should INNV undertake some selling pressure, technicians will look for a hold over the dynamic support of the 50 SMA, which closely coincides with static support at $0.15. This will also keep the chart holding the upward trendline that dates back to the low in mid-February.
To the upside, the chart needs to break through some resistance at $0.26, which has proved to be a challenge over the last month or so. Should that resistance be broken, the odds are improved that INNV will test the high at 36.9 cents and perhaps make a run at a new higher high to continue the upward channel.
Quickly perusing the Moving Average Convergence/Divergence (MACD) and Relative Strength Index (RSI), two commonly used indicators as proxies of trend and momentum, shows the bulls still are out-muscling the bears. This should be expected given the uptrend, but is always worth a brief analysis to look for anything outside normal technical rules. The MACD holding over the zero line is interpreted as a bullish position. The MACD can’t go up forever, so the cooling in the last month essentially resets the MACD so it has headroom. Holding in positive territory with a new upswing is what technicians want to see. The RSI holding the upper half of the indicators tells traders that the bulls have control of momentum. A move back towards 50 suggests some slowing momentum, but notice the slight upward turn with Friday’s advance, making it worth watching to see if momentum will increase to help shove INNV through the 26-cent resistance.
Biotech is one of those areas where there can be a pretty large disconnect between the sector in general and individual stocks. The closely followed ProShares Ultra NASDAQ Biotech ETF has been under substantial pressure in 2016 and is basically flat from a multi-year low at $35.23 in February. Across the same time span, shares of INNV have bucked that trend with a gain of 721 percent through Friday’s close.