The clinical-stage biopharmaceutical company. It develops therapeutics for the treatment of neurodegenerative diseases, Alector Inc. (NASDAQ: ALEC) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has been forming a symmetrical triangle pattern. This pattern is shown as pink lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend.
Daily Chart – ALEC
#2 Price above MA: The price is currently near the short-term moving average of 50-day SMA and above the longer-term moving average of 200-day SMA. This is a possible bullish sign.
#3 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#4 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).
#5 Bullish RSI: The RSI is currently above 50 and moving higher.
This is a possible bullish sign.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. ALEC had taken support at the 38.2% Fibonacci support level before moving higher, as seen in the weekly chart. So, this seems like a strong support area for the stock.
Weekly Chart – ALEC
#7 Bullish Stoch: The %K line of the stochastic has currently crossed above the %D line in the weekly chart. It is also moving up from oversold levels. All these indicate possible bullishness.
#8 Bullish ADX and DI: The weekly chart shows that the +DI line has crossed above the -DI line. The ADX line has also moved higher from below the +DI and -DI lines. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ALEC is above the 50-day SMA. This translates to a price of around $26.00.
TP: Our target prices are $30 and $35 in the next 4-6 months.
SL: To limit risk, place stop-loss at $23.30. Note that the stop-loss is on a closing basis.
Our target potential upside is 15% to 35% in the next 4 to 6 months.
For a risk of $2.70, our target rewards are $4.00 and $9.00. 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 from the symmetrical triangle pattern with a 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 regulatory changes in the sector.
Happy Trading!
Tara
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