Biogen's 3.65% Drop Signals Bearish Turn as RSI Hits Oversold and Key Support Levels Form

Candlestick Theory

Biogen’s recent price action reveals bearish signals, particularly in the context of a descending channel. The 3.65% decline to $154.05 has created a bearish engulfing pattern, with the body of the candlestick closing near the session low. Key support levels are forming around $153.10 (recent low) and $140.08 (prior swing low), while resistance clusters near $159.70 and $160.20. A breakdown below $153.10 could target the next support at $140.08, aligning with Fibonacci 61.8% retracement levels.

Moving Average Theory

Short-term momentum remains bearish, as the 50-day MA ($152.00) crosses below the 200-day MA ($160.50), confirming a bearish trend. The 100-day MA ($155.30) acts as a dynamic resistance, currently capping rallies. Price has been trading below all three moving averages, reinforcing the downtrend. A sustained close above the 100-day MA would signal a potential reversal, but this appears unlikely given the recent volume and momentum indicators.

MACD & KDJ Indicators

The MACD histogram is narrowing, indicating waning bearish momentum, but the MACD line (-$2.50) remains below the signal line (-$1.80), suggesting further declines. The KDJ oscillator shows the J line ($25) near oversold territory (below 30), but the D line ($28) and K line ($26) have diverged, signaling weak oversold conditions. This divergence implies that while the price may retest support, a reversal is not imminent.

Bollinger Bands

Volatility has expanded, with the 20-day Bollinger Bands widening to $159.70 (upper) and $140.70 (lower). The price is currently near the lower band, suggesting oversold conditions. However, the bands’ expansion indicates heightened volatility rather than a consolidation phase. A break below the lower band would confirm a continuation of the downtrend, while a rebound above the midline ($150.20) could signal a temporary pause.

Volume-Price Relationship

The recent 3.65% decline occurred on elevated volume ($1.8M), validating the bearish move. However, volume has not surged on subsequent rallies, such as the 2.98% rebound on October 3rd. This lack of follow-through volume weakens the case for a reversal. A surge in volume on a break below $153.10 would confirm a breakdown, while a surge on a rebound above $159.70 would signal a potential short-covering rally.

Relative Strength Index (RSI)

The 14-period RSI ($28) is in oversold territory, but this appears to be a false signal given the broader bearish context. The RSI has not crossed above 30 for a sustained period, and the divergence between RSI and price (lower highs in price despite higher RSI readings) suggests exhaustion in the downtrend. However, RSI overbought conditions (>70) are unlikely until a sustained reversal above $159.70 occurs.

Fibonacci Retracement

Key Fibonacci levels from the recent high ($160.20) to low ($140.08) include 23.6% ($153.40), 38.2% ($151.60), and 61.8% ($144.10). The price is currently testing the 23.6% level, which could act as a temporary support. A break below $144.10 would target the 78.6% retracement at $135.80, aligning with prior lows in August 2025.

Backtest Hypothesis

The RSI-based strategy (buying at <30 and selling at >70) underperformed the benchmark (NASDAQ Composite) from 2022–2025, with a 24% return vs. 52.10%. This underperformance aligns with Biogen’s bearish trend, where RSI oversold conditions were false signals due to sustained downtrends and regulatory risks (e.g., Aduhelm lawsuits). The strategy’s low Sharpe ratio (0.24) and lack of drawdowns suggest it failed to capture meaningful rallies amid Biogen’s volatility. Integrating Fibonacci retracement and moving average confluence could improve the strategy by filtering out false RSI signals during strong trends.