The pharmaceutical company focused on the development, manufacture, and commercialization of pharmaceutical products based on its DepoFoam extended release drug delivery technology, for use primarily in hospitals and ambulatory surgery centers, Pacira Biosciences Inc. (NASDAQ: PCRX) shows signs of an upcoming price surge according to its latest charts.
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock was forming a symmetrical triangle pattern.
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.
Currently, the stock has broken out of the symmetrical triangle pattern, indicating possible bullishness.
#2 Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA and had moved higher with high volume. This indicates an overall bullishness of the stock.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, which is a possible bullish indication.
#4 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines. The +DI line and the ADX line is also currently above –DI line. All these indicate possible bullishness.
#5 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color). This indicates a possible bullish bias.
#6 Above Support Area, Consolidation Area: The weekly chart shows that the stock is currently above a support area. This is marked as a pink color dotted line. The stock has also broken out of a consolidation area, which is marked as a blue color rectangle. All these indicate that this is a good area for the stock to bounce higher.
#7 Bullish MACD: The MACD line (blue color) is currently above the signal line (orange color) in the weekly chart as well, indicating possible bullishness.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for PCRX is if it corrects to the support level of $50.
However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of PCRX if it trades above $52.50.
TP: Our target prices are $56 and $62 in the next 3-6 months.
SL: To limit risk, place a stop loss at $46.20 (for entry near $50) and $50.20 (for entry near $52.50). Note that this stop loss is on a closing basis.
Our target potential upside is almost 7% to 24% in the next 3-6 months.
- Entry near $50: For a risk of $3.80, our target rewards are $6.00 and $12.00. This is almost 1:2 and 1:3 risk-reward trade.
- Entry near $52.50: For a risk of $2.30, our target rewards are $3.50 and $9.50. This is almost 1:2 and 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 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 the sector.