The company that designs, develops, manufactures, markets, and sells implantable lenses for the eye, and delivery systems to deliver the lenses into the eye, STAAR Surgical Company (NASDAQ: STAA) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 Ascending Triangle pattern Breakout: STAA’s daily chart shows that the stock has broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked on the daily chart in purple color. A breakout from a bullish pattern like this usually indicates the possibility of an upmove in the near-term.
Daily Chart – STAA
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is typically considered as bullish sign.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX indicator in the daily chart shows bullishness as the ADX line and the +DI line are above the -DI line and the ADX line is moving higher from below the +DI and -DI lines.
#6 Consolidation and Breakout: The weekly chart shows that the stock had recently broken out of a consolidation area. This area is marked in a green color rectangle in the weekly chart. The stock had then retested the breakout level of the consolidation area again before bouncing higher. This is a strong bullish sign.
Weekly Chart – STAA
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of STAA above the price of $68.00. Alternatively, you can purchase the shares of STAA if it corrects to the breakout level of the ascending triangle pattern at around $62.00
TP: Our target prices are $75 and $80 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $55 (for entry near $62) and $63.60 (for entry near $68). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 10% to 29% in the next 3-5 months.
Entry near $62: For a risk of $7.00, the target rewards are $13.00 and $18.00. This is a nearly 1:2 and 1:3 risk-reward trade.
Entry near $68: For a risk of $4.40, the target rewards are $7.00 and 12.00. 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 with high volume from the ascending 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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