Novartis Faces Bearish Tide as Death Cross Signals Further Descent

On March 11, Novartis (NVS) continued to experience significant downward pressure, with its stock price declining for two consecutive days, resulting in a cumulative drop of 3.65%. Despite the volatile nature of the stock market, it's essential to examine the underlying factors contributing to this trend through various analytical tools.

Recently, Novartis displayed a technical pattern of the KDJ indicator forming a death cross, a signal typically associated with increased risk. The formation of a death cross occurs when the short-term moving average crosses below the long-term moving average, especially when the D-line breaks out in the overbought range. This suggests heightened downward pressure on the market. However, historical backtesting since 2020 indicates that while this pattern has appeared multiple times, its actual impact on the stock price has been relatively limited.

From a long-term perspective, Novartis continues to make strategic investments and developments in the biotechnology sector, particularly in emerging fields such as cell and gene therapy (CGT), antibody-drug conjugates (ADC), and synthetic biology. The company has not only initiated collaborations in these areas but has also engaged in the research and development of related technologies, potentially laying a robust foundation for future growth. However, current market sentiment remains pessimistic, and investors should remain vigilant about shifts in market sentiment.

Furthermore, Novartis's activities in hepatitis B drug development, investments in the reproductive health sector, and a CDMO strategic partnership with Merck in pet medicine and animal health care illustrate the company's diversification strategy. While these ventures might not be immediately reflected in the stock price, they might enhance the company's business breadth and depth in the long run.

Investors' interest in Novartis might also be further informed by the company's financial reports. Although the third-quarter main revenue of 2024 showed a slight year-on-year decline, there was a significant increase in net profits, reflecting improvements in internal management efficiency. Moreover, the company is poised to benefit from the business expansion in fermentation technology and chemical synthesis technology.

In summary, while Novartis is currently experiencing a bearish stock price movement and market sentiment, its proactive approaches in innovative research and strategic collaborations add potential for future growth. Investors are advised to closely monitor Novartis's progress in the biotechnology sector while considering the influence of technical indicators and market sentiment fluctuations on short-term stock prices to make more informed investment decisions.