Nuvalent shares jumped 39% yesterday after GSK agreed to pay $10.6 billion for a company that makes cancer drugs. The technical analysis here is simple: none of this matters. The chart patterns mean nothing. The price action is irrelevant. Some executives in London decided to write a check with a lot of zeros because their own scientists couldn't figure out what to do next.
GSK needs new drugs. Their old drugs stop making money soon. This condition is called a patent cliff, which sounds like a geological formation but is actually just what happens when pharmaceutical companies realize they've been coasting on the same molecules for two decades. The cure for a patent cliff is apparently to panic-buy a smaller company at a 39% premium to yesterday's close.
Retail traders who bought Nuvalent last week now believe they are geniuses. They will tell you about their research process, which involved reading a Reddit thread and checking if the ticker had good vibes. They will not tell you about the seventeen other biotech companies they bought that are down 60% because nobody wanted to acquire them. Survivorship bias is a hell of a drug, though not one GSK can patent.
The summary mentions a biotech dealmaking frenzy. Frenzy is a generous word for what happens when multiple pharmaceutical giants suddenly notice their revenues are about to fall off a cliff and decide to solve the problem by playing Monopoly with actual billions of dollars. The race to bolster pipelines is really just a race to avoid admitting you haven't invented anything useful in years.
The chart on Nuvalent looked bearish as hell until the moment it didn't. The moving averages were meaningless. The support levels were fiction. The Fibonacci retracements were, as always, astrology for people who wear suits. Then GSK showed up with a briefcase full of money and every technical indicator immediately became irrelevant, which is the same thing that happens every other day except sometimes you get lucky.
Congratulations to everyone who held Nuvalent shares. Your patience paid off not because you understood the science or read the charts correctly, but because GSK's patent lawyers started sweating.
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