Adaptimmune Stock: How Long Will Rally Continue?

Adaptimmune Therapeutics plc (ADAP) shares broke out on high volume on March 15 after the company announced positive preliminary results from the first four patients dosed with NY-ESO SPEAR T-cells after being diagnosed with myxoid/round cell liposarcoma (MRCLS). In addition, the company reported fourth quarter financial results, saying it believes that existing cash and equivalents will fund its current operating plan through early 2020.

Last Wednesday, the stock moved a further 17% higher after experiencing a bullish engulfing pattern. Analysts have been very bullish on the stock following the NY-ESO SPEAR T-cell news. Leerink analysts initiated coverage on the stock with an Outperform rating and a $15.00 price target, saying that the T-cell receptor platform could potentially address solid-state tumors, which would be transformational for the cell therapy space if successful. (See also: 3 Hot Junior Biotech Plays.)

Technical chart showing the performance of Adaptimmune Therapeutics plc (ADAP) stock

From a technical standpoint, the stock broke out from trendline resistance earlier this month, consolidated for a period of time and experienced a second breakout last week. The relative strength index  (RSI) appears overbought at 75.60, but the moving average convergence divergence (MACD) remains in a strong bullish uptrend. These indicators suggest that the stock could see some consolidation but imply that it is poised to continue its rally higher.

[Interested in learning how to determine if a stock is technically overbought or oversold? Check out Chapter 4 of the Technical Analysis course on the Investopedia Academy]

Traders should watch for some consolidation above prior highs of around $11.50 before a further move higher. If the stock breaks down from these levels, traders could see a move down to trendline support at around $9.75 at its prior highs or the 50-day moving average and trendline resistance at around $8.80. The company could see significant upside if its T-cell receptor platform continues to show positive results. (For more, see: Top 5 Biotech Stocks for 2018.)

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

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