The biotechnology company that focuses on neurotrophic factors and their regenerative capabilities, as well as the study of both cytokine and tyrosine kinase receptors, Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) seem to be gearing up for a surge as per its latest charts.
#1 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#2 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently forming a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs.[hana-code-insert name=’adsense-article’ /]This pattern is marked on the daily chart as purple lines.
The breakout from a symmetrical triangle pattern usually signifies a bullish move.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color).
This is a possible bullish setup.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Bullish RSI: The RSI is currently above 50 and moving up, indicating bullishness.
#6 Pennant Pattern: The weekly chart shows that 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. 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 IH&S Pattern: As you can see from the chart, over the past few weeks, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. This is marked in orange color. An IH&S pattern is a strong bullish pattern. After the breakout from this IH&S pattern, the stock may move higher in the short term.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of REGN in two scenarios
- If the stock breaks out of the symmetrical triangle pattern. This translates to a daily close above $382.
- If the stock corrects to the lower end of the symmetrical triangle pattern, at around $344.
TP: Our target prices are $400 and $420 in the next 3-6 months.
SL: To limit risk, place a stop loss at $335 (entry near $344) and $366 (entry near $382). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 10% to 22% in the next 3-6 months.
- Entry at $344: For a risk of $9, the target rewards are $56 and $76. This is a nearly 1:6 and 1:8 risk-reward trade.
- Entry at $382: For a risk of $16, the target reward (TP#2) is $38. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x 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 symmetrical 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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