Long-Term Base Breakout Sets Structural Foundation
Jazz Pharmaceuticals plc (JAZZ) is a specialty biopharmaceutical company focused on neuroscience and oncology. Its stock recently completed an approximately 50% retracement of the prior advance and a successful test of trend support at the 50-day moving average. A higher swing low resulted, along with the formation of a bullish flag pattern, a trend continuation setup. The combination of a retracement level combined with a moving average, strengthens the significance of that low.
Bull Flag Builds on Major Breakout Leg
The formation of a bull flag pattern followed the recent breakout of a long-term basing pattern, with a breakout above the 2015 high of $194.73 triggering in April and a subsequent advance that eventually reached a new high of $243.32 in May. That led to a pullback and the formation of the flag consolidation pattern. An upside breakout of the flag triggered on Tuesday and it was confirmed with a daily close at $243.47, above the May high.
Breakout Validity Still in Question
A strong new high closing price sets the stage for a continuation of the long-term bull trend, with a new leg up. Given the larger bullish indications – a long-term base breakout followed by a constructive advance – another decisive advance may follow the new flag breakout. Notably, a long-term base breakout can be the beginning of a healthy sustained advance. Given the behavior of JAZZ so far, that remains the most likely scenario.
Key Moving Averages Anchor Trend Behavior
Since the 50-day moving average has clearly been recognized as trend support, that indicator continues to be key going forward. Moreover, following a decisive new bull flag breakout, the 20-day moving average should take precedence, as momentum continues to improve. When the longer pattern lines up with the shorter pattern, the probability of follow-through increases significantly.
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