The clinical-stage biotechnology company that focuses on developing transformative gene therapies for severe genetic diseases and cancer, Bluebird bio Inc (NASDAQ: BLUE) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern: As you can see from the daily chart of BLUE, the stock had been forming a falling wedge pattern during the past few months. This is marked in orange color lines. The stock has currently taken support near the bottom of the falling wedge pattern. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
#2 RSI Oversold: Relative strength index (RSI) is currently near oversold levels. This indicates that the stock may move higher.
#3 CCI Moving Up: The CCI is below -100 and moving up, indicating possible bullishness.
#4 Double Bottom: A double bottom pattern is being currently formed for BLUE. This is shown in the figure in green color. A Double bottom pattern is a bullish reversal pattern, indicating that the stock could possibly move upwards shortly.
#5 Doji: The latest candle is a Doji, indicating indecision between buyers and sellers. This points to a possible reversal to the upside in the near-term.
#6 Oversold RSI: In the weekly chart, the RSI is oversold indicating that an upmove may happen soon.
#7 Good support: There is a long-term support level close by for the stock, marked as pink dotted lines.[hana-code-insert name=’adsense-article’ /]This seems like a good level for the stock price to bounce back from.
In addition, the stock has currently taken support at the 61.8% Fibonacci retracement level.
#8 Flag Pattern: The stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern, which is a continuation pattern.
The flag pattern is marked in orange color in the weekly chart.
Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the shares of BLUE at the current price of $154.90. The remaining half can be purchased if the stock corrects to $142.
TP: Our target prices are $175 and $190 in the next 4-6 months.
SL: To limit risk, place a stop loss below $146.70 (entry at $154.90) and $138 (entry at $142). Note that the stop loss is on a closing basis.
Our target potential upside is 12% to 34% in the next 4-6 months.
- Entry at $142: For a risk of $4, our first target reward is $33 and the second target reward is $48. This is a nearly 1:8 and 1:12 risk-reward trade.
- Entry at $154.90: For a risk of $8.20, our first target reward is $20.1 and second target reward is $35.10. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 12x 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 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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