The human tissue company based in Alachua, Florida that makes products to remedy peripheral nerve damage, AxoGen, Inc. (NASDAQ: AXGN) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock had been forming a falling wedge pattern during the past few weeks. This is marked as purple color lines. The stock had recently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
#2 Bullish MACD: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal. The MACD is also near oversold levels, which is a bullish sign.[hana-code-insert name=’adsense-article’ /] #3 Oversold RSI: The RSI is currently near oversold levels, indicating that it may reverse to upside soon.
#4 Hammer: The latest candle is a hammer, indicating that the stock may reverse to upside soon.
#5 Double Bottom Pattern: From the daily chart, we can see that the stock is currently forming a Double Bottom pattern.
This is marked in the daily chart in orange color.
A double bottom pattern is a strong bullish pattern and indicates a possible upmove in the short term.
#6 Pennant Pattern: As seen from the weekly chart below, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart below in purple color. Currently, the stock is trading near the lower 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).
#7 Support at Fibonacci Level: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. The stock has currently taken support at the 50% Fibonacci retracement level of the move. So, this seems like a good support area.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of the AXGN at the current price of $33.20 and the rest if it breaks out of the double bottom pattern at around $36.
TP: Our target prices are $45 and $55 in the next 4-6 months.
SL: To limit risk, place a stop loss below $30.80. Note that the stop loss is on a closing basis.
Our target potential upside is 25% to 66% in the next 4-6 months.
- Entry at $33.20: For a risk of $2.40, our first target reward is $11.80 and the second target reward is $21.80. This is a nearly 1:5 and 1:9 risk-reward trade.
- Entry at $36: For a risk of $5.20, our first target reward is $9.00 and the second target reward is $19.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 9x 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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