The molecular diagnostics company with an initial focus on the early detection and prevention of colorectal cancer, EXACT Sciences Corporation (NASDAQ: EXAS) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart shows that the stock has currently broken out of an Ascending Triangle pattern with high volume. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – EXAS
#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 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) and ADX line are greater than (-DI), and the ADX line had risen higher from below both (+DI) and (-DI).
#4 MACD above Signal Line: In the daily chart, the MACD line is above the MACD signal line which is a bullish signal.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, which is a possible bullish indication
#6 IH&S Pattern Breakout: From the weekly chart, we can see that the stock had recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This is marked in the chart in orange color. An IH&S pattern is a bullish pattern. A breakout from an IH&S pattern is usually the sign of an upcoming bullish move.
Weekly Chart – EXAS
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
#8 Above Resistance Area: The stock has currently closed above a strong resistance area, which is marked as a pink color dotted line. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level for EXAS is if it corrects to the price of around $120 to $122. However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of EXAS above yesterday’s close, at around $131.20.
TP: Our target prices are $140 and $150 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $109.90(for entry near $121) and $125.30 (for entry near $131.20). Note that this stop loss is on a closing basis.
Our target potential upside is 7% to 24% in the next 4-6 months.
- Entry near $121: For a risk of $11.10, the target rewards are $19.00 and $21.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $131.20: For a risk of $5.90, the target rewards are $8.80 and $18.80. 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 and IH&S 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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