The clinical-stage biopharmaceutical company focused on the treatment of serious diseases in which protein growth factors play a fundamental role, Scholar Rock Holding Corp (NASDAQ: SRRK) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout Support: The stock’s daily chart shows that it had recently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. Currently, the stock has taken support near the breakout level of the ascending triangle pattern, which is a bullish sign.
Daily Chart – SRRK
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
#3 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#4 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart.
The stoch is also moving up from oversold levels.
All these are possible bullish indications.
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of the prevailing downtrend. This is a possible bullish sign.
Weekly Chart – SRRK
#6 Price above MA: The stock is currently trading above the 50-week SMA, indicating an overall bullish bias for the stock.
#7 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the weekly chart. This typically indicates a bullish setup.
#8 Bullish ADX: The ADX line has currently moved up from below –DI and +DI lines. The +DI and ADX lines are also currently above –DI line. This indicates possible bullishness.
#9 Bullish RSI: The RSI in the weekly chart is also currently above 50 and moving higher. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of SRRK if it trades above yesterday’s close. This translates to a price of around $14.50.
TP: Our target prices are $18 and $22 in the next 3-6 months.
SL: To limit risk, place a stop loss near $12.10. Note that this stop loss is on a closing basis.
Our target potential upside is 24% to 52% in the next 4-6 months.
For a risk of $2.40, the target rewards are $3.50 and $7.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern breakout level. 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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