The company focusing on genetic research specifically in cancer detection, based out of Redwood City, California, Genomic Health, Inc. (NASDAQ: GHDX) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, the stock had broken out of a falling wedge pattern that was formed during the past few months. This is marked in the daily chart in pink color. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – GHDX
#2 MACD Above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: In the daily chart, the stock is currently trading above its 50-day as well as 200-day SMA.This implies that the bulls are currently in control.
#4 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line. This typically indicates possible bullishness.
#5 Support At Fibonacci Level: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again.
GHDX had taken support at the 38.2% Fibonacci support level of the upmove and has now crossed above the 61.8% Fibonacci support level, as seen in the weekly chart. This seems like a good point to bounce up higher.
Weekly Chart – GHDX
#6 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines in the weekly chart. The +DI line is also currently above –DI as well as ADX line. This indicates possible bullishness.
#7 Bullish Stochastic: The weekly chart shows that the %K (blue) line of stochastic is currently above the %D (Orange) line. This is a possible bullish indication.
#8 Price above MAs: In the weekly chart as well, the stock is currently trading above its 50-day as well as 200-day SMA. This implies that the bulls are currently in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GHDX is if the stock corrects to the support area of around $68.
TP: Our target prices are $80 and $90 in the next 4-6 months.
SL: To limit risk, place stop-loss at $62.60. Note that the stop loss is on a closing basis.
Our target potential upside is 18% to 32% in the next 4-6 months.
For a risk of $5.40, our target rewards are $12.00 and $22.00. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern 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.
Happy Trading!
Tara
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