The biotechnology company that develops full-thickness hair-bearing skin for treatment of burns, wounds and scars, Polarityte Inc. (NASDAQ: PTE) 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 months. This is marked in the daily chart in pink color. A falling Wedge Patter is a bullish pattern. Once the stock moves up and breaks out from it, it has the potential to move further up. Currently, the stock is near the upper rail of the falling wedge pattern.
#2 Good supports: The daily chart of PTE shows that the stock has a good support nearby. This is marked as a green dotted line. The stock is also trading above its 50-day SMA. These are all bullish signs.[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color).
This is a possible bullish indication.
#4 RSI Strong: Relative strength index (RSI) is currently above 50.
This indicates the strength of the current upmove.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating possible bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. PTE has currently taken support at 23.60% Fibonacci support level as seen in the weekly chart. So, this seems like a good support area for the stock to bounce upwards.
#7 RSI moving up: The RSI is moving up from oversold levels on the weekly chart of PTEs, indicating strength.
#8 Bullish Stoch: The %K line of the stochastic has currently crossed above the %D line in the weekly chart. The value has also moved up from below 20. All these indicate possible bullishness.
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 PTE if the stock breaks out of the falling wedge pattern at around $17.80 and the rest if the stock closes above the 200-day SMA at around $20.60.
TP: Our target prices are $25 and $30 in the next 4 to 6 months.
SL: To limit risk, place the stop loss below $15.90. Note that stop loss is on a closing basis.
Our target potential upside is 40% to 68% in the next 4-6 months.
- Entry at $17.80: For a risk of $1.90, our target rewards are $7.20 and $12.20. This is a 1:4 and 1:6 risk-reward trade.
- Entry at $20.60: For a risk of $4.70, our target reward (TP#2) is $9.40. This is a 1:2 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 and support area 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.
Tara[hana-code-insert name=’MMPress’ /]