The manufacturer of products for the life science research and clinical diagnostics markets, Bio-Rad Laboratories, Inc. Class A (NYSE: BIO) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Rising Wedge Pattern Breakdown: The daily chart shows that BIO has recently broken down from a rising wedge pattern that was formed during the past few months. This is a bearish pattern and is marked in pink color lines in the daily chart. Once a stock breaks down from a rising wedge pattern, it typically moves lower in the near-term.
Daily Chart – BIO
#2 Price below MA: The stock price is currently below both 50-day as well as 200-day SMA. This is a possible bearish sign.
[hana-code-insert name=’adsense-article’ /]#3 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#4 %K below %D in Stochastic: The %K line is currently below the %D line in stochastic of the daily chart.
This indicates possible bearishness.
#5 Bearish ADX and DI: The ADX and DI indicate bearishness.
This is because (+DI) < (-DI); ADX and (-DI) are above (+DI); and ADX has started rising from below both (+DI) and (-DI).
All these points to possible bearishness.
#6 Bearish Stochastic: The stochastic in the weekly chart is moving down after reaching overbought levels. The %K line is also below the %D line. All these indicate possible bearishness.
Weekly Chart – BIO
#7 MACD below signal line: The MACD line (blue color) has currently crossed below the MACD signal line (orange color) in the weekly chart, indicating possible bearishness.
#8 Near Supply Area: The weekly chart shows that the stock is currently near a supply area. This area is marked as a pink rectangle. Despite many attempts, the stock has not been able to cross above this level. Such a level would then typically start to act as a strong resistance level. So, this seems like a good area for the stock to correct. This is a bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on BIO below the support level of $315.00.
TP: Our target prices are $300 and $280 in the next 3-6 months.
SL: To limit risk, place a stop loss at $325. Note that this stop loss is on a closing basis.
Our target potential downside is 5% to 11% in the next 3-6 months.
For a risk of $10.00, our target rewards are $15.00 and $35.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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