The developer, manufacturer, and marketer of portable blood analysis systems that are used in medical specialties in human or veterinary patient care to provide clinicians with blood constituent measurements, Abaxis Inc. (NASDAQ: ABAX) seems to be getting ready for a price surge according to its latest charts.
#1 Ascending triangle pattern support: ABAX’s daily chart shows that the stock has been forming an ascending triangle pattern during the past several weeks. Currently, the stock has taken support at the bottom of the Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked in the chart in purple lines. The stock has historically taken support near the bottom of ascending triangle pattern before moving higher again.
#2 Above MA: The stock price is currently above both 50-day as well as 200-day SMA. The stock has also currently taken support at the 50-day SMA line. These are all possible bullish signs.
[hana-code-insert name=’adsense-article’ /]#3 RSI above 50: In the daily chart, the RSI is above 50 and moving up. This indicates possible bullishness.
#4 MACD Nearing Crossover: The daily chart shows that the MACD line (blue color) is about to cross above the signal line (orange color).
Once the cross happens, it usually indicates the start of a bullish trend.
#5 MA Cross: As you can see from the weekly chart, the short-term moving average of 50-week SMA has crossed above the longer-term moving average of 200-week SMA.
Such crossovers indicate a possible upcoming bullish movement. The stock is also currently trading above both its 50-week and 200-week SMA, which implies that the bulls are currently in control. The uptrend is also unbroken, as the stock has been forming higher highs and higher lows for the past few months.
#6 Pennant Pattern: The weekly chart of ABAX shows that the stock price was in a range for a while (marked as a green rectangle) before breaking out into a strong uptrend. After this, the stock started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked on the chart in purple color. Currently, the stock is trading near the upper end of the pennant. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case).
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy half the intended quantity of shares of ABAX at the current price of $73. The other half can be purchased once the price breaks out of the ascending triangle pattern at around $76.
TP: Our target prices are $85 and $100 based on the ascending triangle pattern in the next 3-6 months.
SL: To limit risk, place a stop loss at $67.40. Note that this stop loss is on a closing basis.
The target potential upside for this trade is nearly 16% to 37% in the next 3-6 months.
- Entry at $73: For a risk of $5.60, the target rewards are $12.00 and $27.00. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry at $76: For a risk of $8.60, the target reward (TP#2) is $24.00. This is a nearly 1:3 risk-reward trade.
This means that this trade offers nearly 2X to 5X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. 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 its sector.
Tara[hana-code-insert name=’investorplace-article’ /]