The biopharmaceutical company that develops and commercializes endocrine therapeutics in the areas of osteoporosis and oncology, Radius Health Inc. (NASDAQ: RDUS) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Double Bottom Pattern Breakout: The daily chart of RDUS shows that the stock has formed a double bottom pattern and broken out of it. This is marked in the chart in purple color. A double bottom pattern is a bullish reversal pattern, and the breakout from this pattern indicates that the stock could possibly move upwards shortly.
Daily Chart – RDUS
#2 Bullish Stoch: The %K line (blue line) is currently above the %D line (orange line) of the stochastic in the daily chart. This usually indicates bullishness.
#3 MACD above Signal Line: The MACD line (blue line) is currently above the MACD signal line (orange line), indicating bullishness.
#4 Above MAs: In the daily chart, the stock is currently trading above both 50-day and 200-day SMA. This implies that the bulls are currently in control.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
#6 IH&S Breakout in Weekly Chart: As evident from the weekly chart, the stock had broken out of an inverted head and shoulders pattern (marked 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 – RDUS
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 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 price of RDUS is if it corrects to the price of around $17.60. Alternatively, you can purchase half the intended quantity of shares of RDUS above yesterday’s close at around $19.00.
TP: Our target prices are $24 and $30 in the next 4-6 months.
SL: To limit risk, place stop-loss at $14.00 (for entry near $17.60) and $15.70 (for entry near $19.00). Note that stop loss is on a closing basis.
Our target potential upside is nearly 26% to 70% in the next 4-6 months.
- Entry at $17.60: For a risk of $3.60, our target rewards are $6.40 and $12.40. This is a 1:2 and 1:3 risk-reward trade.
- Entry at $19.00: For a risk of $3.30, our target rewards are $5.00 and $11.00. This is a 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 from the double bottom pattern with a 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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