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Viking Therapeutics Breaks Out to Key Resistance Levels

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Viking Therapeutics, Inc. (VKTX) shares more than doubled on Thursday after Madrigal Pharmaceuticals, Inc. (MDGL) reported positive Phase II clinical trial results for its MGL-3169 thyroid hormone receptor-beta agonist. The favorable results place the company ahead of rivals when it comes to tapping into the $30 billion market for fatty liver disease, which has no treatments that have been approved by the Food and Drug Administration.

Viking Therapeutics’ lead candidate, VK2809, is an oral small molecule thyroid receptor agonist that uses the same mechanism of action. Based on the sharp increase in price, investors seem confident that the drug candidate will see similar success in its own clinical trials targeting non-alcoholic fatty liver disease and hypercholesterolemia. The largest concerns stemming from the drug candidate relate to its safety profile, that hasn’t been well-established. (See also: A Biotech Sector Primer.)

Technical chart showing the performance of Viking Therapeutics, Inc. (VKTX) stock

From a technical standpoint, the stock broke out from R1 resistance at $5.24 and prior highs around $7.50 to all-time highs of nearly $10.00. The relative strength index (RSI) rose to overbought levels of 84.46, but the moving average convergence divergence (MACD) continued its bullish move higher following its crossover in early May. These indicators suggest that the stock could see some near-term consolidation, but the uptrend remains in place.

[Find out more about supplemental technical indicators like the RSI and MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy]

Traders should watch for some short-term consolidation above reaction support levels of around $7.50 before a further move higher. If the stock breaks below these reaction support levels, traders could see a move down to R2 support at around $6.35 or to R1 support at $5.24, although these scenarios appear less likely given the stock’s strong rally. (For additional reading, check out: Key Financial Ratios for Pharma Stock Investing.)

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

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June 3, 2018

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