The Berkeley, California-based biotechnology company, Xoma Corporation (NASDAQ: XOMA) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Channel Breakout: The daily chart of XOMA shows that the stock was trading within a channel for the past few months. This channel is marked in the daily chart in purple color. There were some unsuccessful attempts done to break out of the channel during these months. Currently, the stock has broken out of the channel. This shows that the stock has gained momentum and has the potential to move further up. There was also good volume during the breakout, indicating that the breakout could sustain this time around.
Daily Chart – XOMA
#2 Above MAs: The stock is currently trading above both its 50-day as well as 200-day SMA. This indicates the overall bullishness of the stock.
[hana-code-insert name=’adsense-article’ /]#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX and (+DI) are above (-DI).
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30.
This indicates possible bullishness.
#5 Multiple Bottoms: The daily chart shows that the stock had taken support at the same level multiple times (marked in pink ellipses).
This pattern is a multiple bottom pattern and a breakout from the neckline indicates the start of a possible bullish move.
#6 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#7 Downtrend Broken: The weekly chart of XOMA shows that the stock has currently broken out of a downtrend. This downtrend line is marked in purple color in the weekly chart. The stock is also trading above both 50-week as well as 200-week SMA, indicating that the bulls are currently in control.
Weekly Chart – XOMA
#8 Above Resistance Level: The stock has currently crossed above an important resistance level (marked as an orange dotted line). This would generally act as a good support level from now on.
#9 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#10 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for XOMA is if the stock corrects to the breakout level of the channel at around $16.
For those with higher risk appetite, you can purchase one-third of the intended quantity of stocks at the current price of $18.98.
TP: Our target prices are $24 and $30.
SL: To limit risk, place a stop loss around $13.10. Note that this stop loss is on a closing basis.
Our target potential upside is almost 50% to 88% in the next 4-6 months. When entering near $16, for a risk of $2.90, our target rewards are $8.00 and $14.00. This is a nearly 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel 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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