Vericel Corporation (VCEL) shares fell nearly 30% after the company presented at the Canaccord Genuity 2018 Musculoskeletal Conference and released its fourth quarter financial results in early March. Revenue rose 41.3% to $23.35 million – beating consensus estimates by $4.59 million – and earnings per share came in at one cent. Since the initial move lower, the stock has recouped most of these losses and is poised to retest its prior highs over the coming session.

On April 4, Leerink analysts initiated coverage on the stock with an Outperform rating and a $15.00 per share price target. Leerink analyst Danielle Antalffy believes that Vericel’s virtual monopoly in the underpenetrated articular cartilage repair market could ultimately see open-ended growth over the long term. The stock responded by moving sharply higher to retest its prior highs made on March 7 before the significant move lower. (See also: The Biotech Sector: A Primer.)

Technical chart showing the performance of Vericel Corporation (VCEL) stock

From a technical standpoint, the stock rebounded from lower trendline resistance at around $9.50 to retest its prior highs near R1 resistance at $12.53. The relative strength index (RSI) is approaching oversold levels at 62.46, but the moving average convergence divergence (MACD) recently experienced a bullish crossover. These indicators suggest that the stock could see a breakout over the near term to fresh highs.

[Find out how to develope a trading strategy based on supplemental indicators like the MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy]

Traders should watch for a breakout from prior highs to R2 resistance at $15.12, which is also just above analyst price targets. If the stock fails to break out, traders should watch for a move lower to retest trendline support near the pivot point at $10.22. Given the positive momentum, traders should have a bullish bias on the stock over the coming sessions. (For more, see: 3 Biotech Stocks Hitting New Highs.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

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