The American biotechnology company based in Brisbane, California, that applies cell and gene therapy to combat haemophilia and other genetic diseases, Sangamo Therapeutics Inc. (NASDAQ: SGMO) seems to be getting ready for a price bump according to the charts.
Bullish Move – Chart Indications
#1 Channel Breakout: As you can see from the daily chart, the stock was trading within a channel for the past several weeks. This is shown in purple color. The stock had typically taken support at the lower rail of the channel before bouncing back. The stock has currently broken out of the channel with high volume, which is a possible bullish sign.
Daily Chart – SGMO
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
#3 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines. The +DI line and ADX line is also currently above –DI line. This indicates possible bullishness.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart. This typically indicates a bullish setup.
#5 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart. This is a possible bullish indication.
#6 IH&S Pattern Breakout: From the weekly chart, we can see that the stock has been consolidating in the form 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. Currently, the stock has broken out of the IH&S pattern, indicating possible bullishness.
Weekly Chart – SGMO
#7 Bullish ADX and DI: The ADX indicator shows bullishness in the weekly chart because (+DI) is greater than (-DI), and ADX is currently rising from below both (+DI) and (-DI). The stock is also trading above its 50-week as well as 200-week SMA. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SGMO is if it corrects to the breakout level of the IH&S pattern, at around $13.30. However, those with a higher risk appetite can purchase the shares of SGMO above yesterday’s close. This translates to a price above $15.70.
TP: Our target prices are $20 and $25 in the next 3-6 months.
SL: To limit risk, place a stop loss below $12.80 (for entry near $15.70) and $8.70 (for entry near $13.30). Note that the stop loss is on a closing basis.
Our target potential upside is nearly 27% to 88% in the next 3-6 months.
- Entry near $13.30: For a risk of $4.60, our target rewards are $6.70 and $11.70. This is a 1:2 and 1:3 risk-reward trade.
- Entry near $15.70: For a risk of $2.90, our target rewards are $4.30 and $9.30. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers almost 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel and goes below it. 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.
Happy trading!
— Tara
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