The American biotechnology company based in Cambridge, Massachusetts that focuses on drug discovery, drug development, and vaccine technologies based exclusively on messenger RNA, Moderna Inc. (NASDAQ: MRNA) seem to be gearing up for a surge as per its latest charts.
#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 purple color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX has started to move up from below (-DI) and (+DI).
#4 Bullish Stoch: The daily chart shows that the %K line (blue color) of the stochastic has currently crossed above the %D (orange color) line near the oversold territory. This is a possible bullish sign.
#5 Bullish MACD: The MACD line is above the MACD signal line in the daily chart, indicating possible bullishness.
#6 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.
#7 Unbroken Uptrend: The weekly chart shows that the stock’s uptrend is unbroken, as it has been forming higher highs and higher lows for the past several months. This uptrend line has been marked as a pink color line. This is a possible bullish sign.
#8 Other bullish signs: The weekly chart shows a bullish stochastic, and bullish ADX and DI. The stock is also trading above its 50-week SMA. All these are bullish indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for MRNA is if it corrects to the breakout level of the symmetrical triangle pattern, which translates to a price of around $74. Alternatively, you can purchase the shares of MRNA above the price of $95.
TP: Our target prices are $95 and $110 in the next 3-6 months.
SL: To limit risk, place a stop loss at $63.70 (for entry near $74.00) and $85.00 (for entry near $95.00). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 16% to 49% in the next 3-6 months.
- Entry near $74.00: For a risk of $10.30, the target rewards are $21.00 and $36.00. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $95.00: For a risk of $10.00, our target reward (TP#2) is $15.00. This is a nearly 1:2 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.
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