The biopharmaceutical company focused on developing and commercializing a sustained-release version of triamcinolone acetonide that is intended to be injected into the joint to treat osteoarthritis, Flexion Therapeutics Inc. (NASDAQ: FLXN) seem 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 has currently broken out of 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 orange color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
Daily Chart – FLXN
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This usually implies a possible bullish bias for the stock.
#3 Channel Breakout: The daily chart shows that the stock had formed a trend channel in the last few months.
This is marked as purple color dotted lines.
Currently, the stock has broken out from the upper rail of this trend channel.
Once the stock breaks out of a channel, it usually moves higher.
#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) and (+DI).
#5 Bullish RSI: The RSI is currently above 50 and moving higher, indicating possible bullishness.
#6 %K above %D: The %K line of the stochastic is currently above the %D line in the daily chart, indicating possible bullishness.
#7 Above Support Area: The weekly chart shows that the stock is currently trading above a support area. This is marked as a pink color dotted line. This is a possible bullish sign.
Weekly Chart – FLXN
#8 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart too, indicating possible bullishness.
#9 Oversold RSI: The RSI is currently moving up after reaching oversold levels, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for FLXN is above $14.20. However, you can purchase half the intended quantity of shares of FLXN if it trades above yesterday’s close, at around $10.60.
TP: Our target prices are $14 and $19 in the next 3-6 months.
SL: To limit risk, place a stop loss at $8.30 (for entry near $10.60) and $12.70 (for entry near $14.20). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 32% to 79% in the next 3-6 months.
- Entry near $10.60: For a risk of $2.30, the target rewards are $3.40 and $8.40. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $14.20: For a risk of $1.50, our target reward (TP#2) is $4.80. This is a nearly 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 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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