The medical aesthetics company that develops, produces, and markets clinical neurotoxins for the treatment of aesthetic, as well as offers regulatory management services, Evolus Inc. (NASDAQ: EOLS) seem to be gearing up for a surge as per its latest charts.
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently 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 in pink color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This usually implies a possible bullish bias for the stock.
This is a possible bullish setup.
#4Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart.
This is a possible bullish indication.
#5 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#6 Channel: The weekly chart shows that the stock had formed a trend channel in the last few weeks. This is marked as orange color lines. Currently, the stock is near the upper rail of this trend channel. Once the stock breaks out of this channel, it could move higher.
#7 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX is starting to move up from below (-DI) and (+DI).
#8 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of EOLS at the current price of $17.24 and the rest if the stock closes above $20.50.
TP: Our target prices are $29 and $37 in the next 3-6 months.
SL: To limit risk, place a stop loss at $14.50 (for entry near $17.24) and $16.90 (for entry near $20.50). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 41% to 115% in the next 3-6 months.
- Entry at $17.24: For a risk of $2.74, the target rewards are $11.76 and $19.76. This is a nearly 1:4 and 1:7 risk-reward trade.
- Entry at $20.50: For a risk of $3.60, the target rewards are $8.50 and $16.50. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 7x 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.