The clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of pharmaceutical therapies to treat ocular surface diseases, Oyster Point Pharma Inc. (NASDAQ: OYST) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently formed 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 as purple lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
Daily Chart – OYST
#2 Price above MA: The price is currently above the 50-day SMA. This usually indicates a possible bullish bias for the stock.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color).
This is a possible bullish setup.
#4 Bullish ADX and DI: The daily chart shows that the ADX as well as +DI lines are above the -DI lines.
The ADX line is also rising from below the -DI and +DI lines.
This is a possible bullish sign.
#5 %K above %D: The %K line of the stochastic is currently above the %D line in the daily chart, indicating a bullish bias.
#6 Flag Pattern: As seen from the daily chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in pink color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, indicating possible bullishness.
#7 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. The stock is currently above the 78.6% Fibonacci level as seen in the weekly chart. This seems like a good support area for the stock
Weekly Chart – OYST
#8 Bullish Stoch: The weekly chart also shows that the %K line has crossed above the %D line. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy price for OYST is if it corrects near the 50-day MA. This translates to a price of around $32. However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of OYST if it trades above yesterday’s close. This translates to a price of around $36.
TP: Our target prices are $40 and $45 in the next 4-6 months.
SL: To limit risk, place a stop loss at $33.40 (for entry near $36) and $28 (for entry near $32). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 11% to 41% in the next 4-6 months.
- Entry near $32: For a risk of $4.00, the target rewards are $8.00 and $13.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $36: For a risk of $2.60, the target rewards are $4.00 and $9.00. This is a nearly 1:2 and 1:4 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 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.
Happy Trading!
Tara
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