The clinical-stage biopharmaceutical company engaged in discovering, developing and commercializing therapeutics to treat blood-based disorders, Global Blood Therapeutics Inc. (NASDAQ: GBT) seems to be poised for a price surge as per its latest charts.
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few weeks. This is marked in the daily chart in purple color. A Falling Wedge Pattern is a bullish pattern. Once the stock moves up and breaks out from it, it has the potential to move further up.
#2 Good support: The daily chart of GBT shows that the stock had formed a high volume candle on June 15, 2018. The stock has also historically taken support near this level. The stock price is currently around this level as well. This area (marked as an orange rectangle) seems like a demand area and hence, a good support level for the stock.[hana-code-insert name=’adsense-article’ /]#3 %K above %D: The stochastics show that the %K line has currently crossed above the %D line. This is a bullish sign.
#4 RSI –Price Bullish Divergence: The daily chart shows that there is a bullish divergence between RSI and price.
While the price had formed a lower low, RSI had formed to a higher low.
This is marked as pink dotted lines in the chart.
The RSI is also near oversold levels. This indicates that an upmove may be imminent.
#5 Bullish Harami Pattern: In the weekly chart, the stock is currently forming a bullish harami pattern. This is a pattern wherein a large candlestick is followed by a smaller candlestick whose body is located within the vertical range of the larger body. Once this bullish candlestick pattern is complete, the stock has the potential to move higher.
#6 Support Levels: The stock is currently near trend line support (marked as a purple line) and also at the 50% Fibonacci retracement support level. This points to possible bullishness in the near term.
#7 CCI moving up: The CCI indicator is currently moving up from below -100. This also indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of GBT at the current price of $41.35.
TP: Our target prices are $50 and $65 in the next 3-6 months.
SL: To limit risk, place stop-loss at $36.50. Note that stop loss is on a closing basis.
Our target potential upside is 21% to 57% in the next 3-6 months. For a risk of $4.85, our target rewards are $8.65 and $23.65. This is a 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a high volume. 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.
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