The clinical-stage biopharmaceutical company that develops therapeutics for the treatment of diseases caused by excessive or uncontrolled activation of the complement system, Ra Pharmaceuticals Inc. (NASDAQ: RARX) seem to be gearing up for a surge as per its latest charts.
#1 Ascending Triangle pattern: RARX’s daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color lines. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 IH&S Pattern: From the daily chart of RARX, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in orange color.
An IH&S pattern is a bullish pattern.
A breakout from an IH&S pattern is usually the sign of an upcoming bullish move.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI).
#5 Bullish RSI moving up: In the daily chart, the RSI is above 50 and moving upwards. This indicates possible bullishness.
#6 Cup and Handle Pattern: The weekly chart shows that a cup and handle pattern is being currently formed for the stock. This is marked in the chart in purple color. The cup and handle pattern is a consolidation and breakout pattern. Since this pattern is being formed for more than a year now, it indicates that the pattern is very strong. If the stock breaks out of the cup and handle pattern with high volume, the stock can possibly give high returns.
#7 Bullish RSI moving up: In the weekly chart as well, the RSI is above 50 and moving upwards. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of RARX if the stock breaks out from the IH&S pattern and ascending triangle pattern at around $18.50. But for those with higher risk appetite, you can purchase the shares of RARX at the current price of $15.98.
TP: Our target prices are $25 and $30 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $14.30 (for entry near $15.98) and $16.80 (for entry near $18.50). Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 87% in the next 4-6 months.
- Entry at $15.98: For a risk of $1.68, the target rewards are $9.02 and $14.02. This is a nearly 1:5 and 1:8 risk-reward trade.
- Entry at $18.50: For a risk of $1.70, the target rewards are $6.50 and $11.50. This is a nearly 1:4 and 1:7 risk-reward trade.
In other words, this trade offers nearly 4X to 8X 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.
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