The American manufacturer of diagnostic healthcare products that are sold worldwide, Quidel Corporation (NASDAQ: QDEL) seems to be poised for a short-term decline in its price as per its latest charts.
Bearish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently forming a symmetrical triangle pattern. This pattern is shown as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out or breaks down. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakdown from the lower line occurs, it usually signifies the start of a new bearish trend. Currently, the stock is trading near the lower rail and could move lower.
Daily Chart – QDEL
#2 Bearish Stochastic: The %K line is currently below the %D line in stochastic of the daily chart. This indicates possible bearishness.
#3 Bearish RSI: The daily chart shows that the RSI is currently moving down from overbought levels.
This is a possible bearish indication.
#4 Bearish Engulfing candlestick pattern: The weekly chart shows that the stock is currently forming a bearish engulfing candlestick pattern.
This is marked as an orange ellipse in the chart.
A bearish engulfing candlestick pattern comprises of two candles and appears during an uptrend.
The first candle would be a small green candle while the second candle would be a big red candle. The second candle would completely engulf the body of the first candle. The formation of this pattern indicates possible bearishness.
Weekly Chart – QDEL
#5 %K below %D in Stochastic: The %K line has now crossed below the %D line in stochastic in the weekly chart. The stoch indicator is also moving down from overbought levels. All these are possible bearish indications.
#6 Bearish RSI: The weekly chart shows that the RSI is currently moving down from overbought levels, which is a possible bearish sign.
#7 Supply Area: The stock appears to be near a supply area currently, as it was not able to cross above the current pivot high even after multiple attempts.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on QDEL below the price of around $178.
TP: Our target prices are $170 and $160 in the next 3-6 months.
SL: To limit risk, place a stop loss at $183.50. Note that this stop loss is on a closing basis.
Our target potential downside is 5% to 10% in the next 3-6 months.
For a risk of $5.50, our target rewards are $8.50 and $18.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the symmetrical triangle pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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