The pharmaceutical company headquartered in South San Francisco, California, Tricida Inc. (NASDAQ: TCDA) seems to be ready for a price surge in the near-term.
Bullish Indications
#1 Channel Breakout: The daily chart of TCDA shows that the stock was trading within a downtrend channel for the past few days. This channel is marked on the daily chart in purple color. Currently, the stock has broken out of the channel. This seems like a possible bullish indication.
Daily Chart – TCDA
#2 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI). These point to a possible upmove in the near-term.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color).
[hana-code-insert name=’adsense-article’ /]This is a possible bullish setup.#4 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#5 Rising Stochastic: The %K line is currently above the %D line in the stochastic.
It is also moving up from oversold levels.
All this indicates possible bullishness.
#6 Bounce-back from support area: The daily chart shows that the stock is currently moving up from a support area. This support area is marked as a green dotted line. This is a possible bullish sign.
#7 Cup and Handle Pattern: The weekly chart shows that the stock is forming a cup and handle pattern. This pattern is marked in the chart in pink color. A cup and handle pattern is a consolidation and breakout pattern and a breakout from it indicates that the stock may move higher in the short term.
Weekly Chart – TCDA
#8 RSI Strong: Relative strength index (RSI) is currently above 50 and moving up in the weekly chart. This indicates the strength of the current upmove.
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 TCDA at the current price of $32.95 and the rest if the stock breaks out of the Cup and Handle pattern at around $40.
TP: Our target prices are $40 and $50 in the next 3-6 months.
SL: To limit risk, place a stop loss at $28.50 (for entry near $32.95) and $36.20 (for entry near $40). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 21% to 52% in the next 3-6 months.
- Entry at $32.95: For a risk of $4.45, our first target reward is $7.05 and the second target reward is $17.05. This is a 1:2 and 1:4 risk-reward trade.
- Entry at $40: For a risk of $3.80, our second target reward is $10.00. This is a 1:3 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 channel breakout level with 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 new government rules or regulatory changes in its sector.
Happy Trading!
Tara
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