The US pharmaceutical company focused on the development of orally administered small molecule drugs that regulate gene expression by targeting post-translational control mechanisms in orphan diseases, PTC Therapeutics, Inc. (NASDAQ: PTCT) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart of PTCT shows that the stock was trading within a falling wedge pattern for the past few months. This is marked in the daily chart in purple color. The stock had recently broken out of the falling wedge pattern. A falling wedge pattern is a bullish pattern and a breakout from this pattern shows that the stock has gained momentum and has the potential to move further up.
Daily Chart -PTCT
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day moving average, indicating a possible bullish bias for the stock.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: 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 possible bullish sign.
#4 Bullish ADX and DI: The ADX indicator shows bullishness as (+DI) is greater than (-DI) and the ADX line is rising. This points to a possible upmove in the near-term.
Note: Currently, an inside bar candlestick pattern has been formed in the daily chart.
This is marked as a pink ellipse.
This points to the possibility of a price correction before the next upmove.
Therefore, the ideal buy level for PTCT is above the nearby resistance level of $40.
#5 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again. PTCT had taken support at the 50% Fibonacci support level as seen in the weekly chart. So, this seems like a good area for the stock to bounce upwards.
Weekly Chart -PTCT
#6 RSI moving up: The RSI is above 50 and moving up on the weekly chart, indicating strength.
#7 MACD crossover: In the weekly chart, the MACD (light blue color) had currently crossed above the MACD signal line (orange color) and has started to move upwards. A potential buy signal is generated when the MACD line crosses above the MACD Signal Line. This indicates a possible bullish setup.
#8 Trading Above MAs: The stock is currently trading above its 50-week as well as 200-week moving average, indicating a possible bullish bias for the stock.
#9 Bullish Stochastic: As you can see from the weekly chart, the %K line (blue color) is currently above the %D line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of PTCT above the first major resistance level of around $40.
Note: The rest of the shares can be purchased if the stock crosses above the next resistance level of $50.
TP: Our target prices are $50 and $60 in the next 3 to 6 months.
SL: To limit risk, place a stop loss below $37.80. Note that this stop loss is on a closing basis.
Our target potential upside is almost 25% to 50% in the next 3-6 months. For a risk of $2.20, our first target reward is $10.00 and the second target reward is $20.00. This is a nearly 1:5 and 1:9 risk-reward trade.
In other words, this trade offers nearly 5x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern breakout level. 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.
Happy Trading!
Tara
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