The clinical stage specialty pharmaceutical company that focuses on developing pharmaceutically-produced transdermal cannabinoid therapies for rare and near-rare neuropsychiatric disorders, Zynerba Pharmaceuticals Inc. (NASDAQ: ZYNE) seems to be getting ready for a price surge according to its latest 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 months. This channel is marked on the chart in pink color. The stock has currently broken out of this channel with high volume. This looks like a bullish indication.
Daily Chart – ZYNE
#2 MACD above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#3 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#4 Above MAs: The stock is currently trading above both 50-day as well as 200-day SMA. This means 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 ADX lines are also currently above the –DI line. This indicates possible bullishness.
#6 Double Bottom Pattern Breakout: The stock’s weekly chart shows that the stock had broken out of a double bottom pattern. This is marked on the weekly chart in purple color. This is a possible bullish sign. The breakout level of the double bottom pattern generally acts as a good support level. The stock is also trading above its 50-week as well as 200-week SMA, implying that the bulls are currently in control.
Weekly Chart – ZYNE
#7 Bullish Stochastic: The stochastic indicator shows that the %K line is above the %D line in the weekly chart, indicating possible bullishness.
#8 Bullish MACD: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of ZYNE if it trades above yesterday’s close. This translates to a price of around $8.90. The remaining shares can be purchased if the stock corrects to the breakout level of the channel, at around $6.80.
TP: Our target prices are $12 and $16 in the next 3-5 months.
SL: To limit risk, place a stop loss below $4.00 (for entry near $6.80) and $7.10 (for entry near $8.90). Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 135% in the next 3-5 months.
- Entry near $6.80: For a risk of $2.80, our first target reward is $5.20 and the second target reward is $9.20. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $8.90: For a risk of $1.80, our first target reward is $3.10 and the second target reward is $7.10. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel support 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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