ACADIA Pharmaceutical (ACAD) shares are closing out the year on a strong note rising more than 9% on Tuesday on heavy volume. The stock’s heavy volume stood out as much as the price change given the lightened holiday trading.
Shares moved higher after the announcement that Acadia will replace Independent Bank Group (IBTX) in the S&P SmallCap 600. The change will be effective prior to the opening of trading on Friday, January 3, 2025.
Acadia Pharmaceuticals is a biopharmaceutical company specializing in innovative treatments for central nervous system (CNS) disorders. This includes Parkinson’s disease psychosis, Alzheimer’s-related psychosis, schizophrenia, and Rett syndrome.
The company’s flagship product, NUPLAZID, is FDA-approved for Parkinson’s psychosis. Acadia’s robust R&D pipeline targets growing needs in neurology and psychiatry.
The move to the Small Cap Index will result in short-term buying of the company’s stock as mutual funds, ETFs and other investment vehicles that duplicate the index’s performance need to buy the stock. These fund-based rallies are often short-lived.
The rally did fortify a technical situation that has been building for the bulls.
Acadia’s 50-day moving average is in the process of crossing above the stock’s 200-day moving average. This crossover forms a “Golden Cross”. These technical patterns indicates strengthening momentum and traditionally forecast higher prices over the following 4-6 months.
The rally also returns ACAD shares to their recent highs near $19 presenting an opportunity for the stock to break into new relatively high territory. Such a move will often pique the interest of bullish traders.
Despite the positive developments, Acadia Pharmaceutical shares remain locked in a long-term bear market trend.
The stock crossed below its 20-month moving average in March 2024 and has been unable to gain enough long-term traction to exit its bear market.
This is often the case with pharmaceutical companies, especially those in the small cap universe, as the company’s price reflects the success or failure of its drug pipeline.
While the stock remains a short- to intermediate-term bullish “trade”, shares remain in their bear market trend with a price target of $15.
