Gilead's Game-Changer: What You Need to Know About the Stock

Gilead Sciences' (GILD) new HIV prevention shot, lenacapavir, hit it out of the park in a late-stage trial, showing 100% effectiveness. 2,000 women participated in the trial, and none of them contracted HIV, signaling a potential game-changer for HIV prevention. All Gilead has to do now is to replicate the results once more before seeking FDA approval.

If Gilead is successful, lenacapavir could be available by late 2025.

How Did the Market React?

Shares of GILD jumped 7%, bucking a deep six-month downtrend. Looking at StockCharts' Symbol Summary, GILD also popped up on several positive scans (see the image of the StockCharts' Predefined Scans below).

Gilead looks promising, but it's still a waiting game. Will Gilead replicate its results? It's possible, but nobody knows until it happens. Will the FDA give lenacapavir the green light? Again, nothing's guaranteed.

But does the investment's potential upside significantly dwarf the downside (as long as you mitigate your risk and manage your position size)? It's highly likely. Gilead is on the verge of something huge. Many traders and investors won't wait for FDA approval to jump on what might be the next big breakthrough in HIV prevention.

If you feel this opportunity is too compelling to ignore, here's what you must watch.

The Macro Picture

First, it's important to remember that biotech companies like GILD are often on the cutting edge of medical science, making them highly speculative investments. To appreciate how fickle and risky their stocks can be, take a look at the two boxes in GILD's weekly chart below.

CHART 1. WEEKLY CHART OF GILEAD SCIENCES (GILD). The rapid surge in October 2022 was due to the FDA approval of two of GILD's products. The steep fall in GILD's stock price in 2024 was due to setbacks in the late-stage trial of a cancer treatment drug.Chart source: StockCharts.com. For educational purposes.

The surge within the blue box was driven by two of GILD's key (FDA-approved) products—Biktarvy (a daily HIV treatment drug) and Trodelvy (a cancer treatment drug)—both of which saw substantial sales increases. Note how its SCTR score jumped above the 90 line. Within any SCTR universe, the top 10% of performers typically rank within a range of 90 to 100. The bottom 10% rank between 0 to 10, highlighting weakness in performance levels. That's what happened next to GILD's trend.

You can see this in the red box. At the start of 2024, Gilead's shares fell due to setbacks in their late-stage trial of Trodelvy, which failed to show that it can improve patients' overall survival rates when compared to other existing treatments. As you can see, the SCTR score was close to zero. And even after Thursday's 7% surge, the SCTR, though improving, is still incredibly low at 30.

If GILD is poised to become the "next big thing," does the 30 score indicate a bottom-floor opportunity to jump in?

Here Are the Levels to Watch

Take a look at the daily chart of GILD below.

CHART 2. DAILY CHART OF GILEAD SCIENCES. From strong downtrend to a surprise upside reversal. Is it time to buy?Chart source: StockCharts.com. For educational purposes.

A few points to note about the daily chart are as follows:

• GILD exploded above its 50-day simple moving average (SMA) on high momentum. Before this, the 50-day SMA has acted somewhat as a dynamic resistance level since the beginning of the year.
• The Chaikin Money Flow (CMF) confirms the shift in buyer sentiment; it's above the zero line, indicating a rapid shift from selling to buying pressure.

If you're looking to enter a position in GILD early on, be aware of the potential support levels below $68 and $66 should prices pull back (there's no indication that it will at the moment). The first resistance level GILD needs to surpass is above $70. This level was tested several times last year and served as an important support level this year until it was finally broken in April.

The next important level of resistance sits right below $75. Not only does this mark March's swing high point, but the concentration of volume surrounding this congestion range (see the Volume-By-Price indicator) warns that it might prove a significant zone of contention between the bulls and bears. If price clears that level, and if GILD's trial results continue to look promising, then the path toward (and beyond) $79 might be smoother sailing (to which you can expect some resistance and profit-taking).

The Takeaway

Gilead Sciences (GILD) is making headlines with its new HIV prevention shot, lenacapavir, showing 100% effectiveness in a major trial. If it can replicate its results, the medication has a clear shot at FDA review. If that goes well, the medication can hit the market as early as 2025. GILD has been trending downward for most of the year, with its SCTR score rising from below 10 to a weak 30. If the upcoming trials succeed, lenacapavir could revolutionize HIV prevention and offer significant returns. However, if it fails, tracking the stock's performance will be straightforward. In short, this could be a chance to get in early on a potential game-changer.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.