The company that designs, develops, manufactures and markets implantable lenses for the eye and companion delivery systems, STAAR Surgical Company (NASDAQ: STAA) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has broken out of 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. This pattern is marked on the daily chart as pink lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move.
Daily Chart – STAA
#2 Channel Breakout: The daily chart shows that the stock had formed a trend channel in the past few months. This channel is marked in blue color lines. Currently, the stock has broken out of this trend channel, which is a possible bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 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.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
#6 Flag Pattern Breakout: 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 flag pattern and is marked in the chart below in orange color. A flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case).
Weekly Chart – STAA
#7 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart as well, indicating possible bullishness.
#8 Bullish MACD: The MACD line is above the signal line in the weekly chart, indicating a possible bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for the shares of STAA is above the high of yesterday’s candle. This translates to a price of around $37.50.
TP: Our target prices are $45 and $53 in the next 3-6 months.
SL: To limit risk, place a stop loss at $33.80. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 20% to 41% in the next 3-6 months.
For a risk of $3.70, the target rewards are $7.50 and $15.50. This is a nearly 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 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.
Happy Trading!
Tara
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