The biopharmaceutical company located in San Diego, California, formerly known as Progenx Inc, Ligand Pharmaceuticals Inc. (NASDAQ: LGND) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past several months. It had typically taken support at the bottom of the wedge before bouncing back. This pattern is marked in pink color. The stock has currently broken out of the falling wedge pattern. A breakout from the wedge indicates that the stock may move higher.
Daily Chart – LGND
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
#3 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.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
#5 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.
#6 Consolidation Area: The weekly chart shows that the stock has currently formed a consolidation area, and is trading within those levels. This is marked as a green color rectangle. A breakout from a consolidation area would indicate that the stock would move higher.
Weekly Chart – LGND
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#8 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, the ideal buy level for LGND is if it corrects to the 200-day SMA, at around $99.00. Alternatively, you can purchase the shares of LGND above the near-term resistance level of $108.00.
TP: Our target prices are $117 and $125 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $89.00 (for entry near $99.00) and $103.00 (for entry near$108.00). Note that the stop loss is on a closing basis.
Our target potential upside is 16% to 26% in the next 3-6 months.
- Entry near $99.00: For a risk of $10.00, our first target reward is $18.00, and the second target reward is $26.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $108.00: For a risk of $5.00, our first target reward is $9.00, and the second target reward is $17.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with high volume. 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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