The specialty pharmaceutical company focusing on the development and commercialization of products for patients treated by ear, nose, and throat, OptiNose Inc. (NASDAQ: OPTN) seems to be getting ready for a price bump after a slight correction according to the charts.
Bullish Move – Chart Indications
#1 Channel: As you can see from the daily chart of OPTN, the stock is trading within an uptrend channel for the past several days. OPTN has typically taken support at the lower channel before bouncing back. The stock is currently moving downwards towards the lower channel after a previous bullish move to the upper channel, indicating that it is getting ready for its next big move. This is a bullish sign.
Daily Chart – OPTN
#2 Oversold RSI: Presently, the RSI reading for OptiNose Inc. is near 29. This indicates that the stock is oversold and a reversal of the downtrend may be quite imminent.
[hana-code-insert name=’adsense-article’ /]#3 Support Level: The stock’s daily chart shows that the price is currently near a long-term support (marked as the orange line) for the stock at around $21.
As this long-term support line is also near the lower channel, it is an ideal entry point for trading this stock.
#4 Oversold CCI: The CCI was below -200 and is currently moving up. This is a bullish sign.
#5 Oversold Stoch: The stochastic is currently near oversold levels.
The %K line is presently about to move above the %D line. This is also a bullish sign.
#6 Double Bottom Breakout: The stock had formed a double bottom pattern (marked in orange color) and had broken out of it. The current price is near the breakout level of the double bottom pattern. This would act as a good support area to bounce back.
The stock has also been falling in very low volumes, indicating that the price may reverse soon from the support area.
#7 Trendline Support: The weekly chart of OPTN shows that the stock has typically taken support near its uptrend line (marked in purple color). The current price of the stock is near the uptrend line, indicating a possible reversal from these levels.
Weekly Chart – OPTN
#8 William’s %R: The value of William’s %R is currently below -80, indicating that the stock is currently near oversold levels and could reverse to the upside soon.
#9 Double bottom: The stock had broken out of a double bottom pattern (marked in orange color) in the weekly chart as well. The breakout level (marked as an orange line) acts as a good support level.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, purchase shares of OPTN when it reaches the lower channel near the breakout level of the double bottom pattern. This translates to buy price of around $20.
TP: Our target prices are $25 and $32 in the next 3-6 months.
SL: To limit risk, place a stop loss below $18.80. Note that the stop loss is on a closing basis.
Our target potential upside is nearly 25% to 60% in the next 3-6 months. For a risk of $1.20, our target rewards are $5 and $12. This is a 1:4 and 1:10 risk-reward trade.
In other words, this trade offers almost 4x to 10x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the current channel and goes below the long-term support level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy trading!
Tara
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