Novavax, Inc. (NASDAQ: NVAX) seem to be poised for a price surge as per its latest charts. Novavax, Inc., is an American biotechnology company. Prior to 2020, company scientists had developed experimental vaccines for Ebola, influenza, respiratory syncytial virus, and other emerging infectious diseases.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As seen from the daily chart, the stock has recently formed a Symmetrical Triangle pattern. A symmetrical triangle pattern is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple color lines. Currently, the stock has broken out of the symmetrical triangle pattern. This is a possible bullish sign.
Daily Chart – NVAX
#2 Strong RSI: The daily chart shows that RSI is currently above 50 and moving up, indicating the strength of the current upmove.
#3 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This is a bullish sign.
#4 MACD above Signal Line: In the daily chart, the MACD line is above the MACD signal line which is a bullish signal.
#5 Bullish ADX and DI: The ADX indicator shows bullishness in the daily chart, as the +DI line is above the -DI line, and the ADX line has started to move higher from below both the +DI and -DI lines.
#6 Pennant Pattern: As seen from the weekly chart, the stock was in an uptrend after which it started consolidating and was in a narrow range. This is a classic pennant pattern, which is a continuation pattern. The pennant pattern is marked in pink color lines in the weekly chart. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend which is an uptrend in this case.
Weekly Chart – NVAX
#7 Above MAs: The weekly chart shows that the stock is trading above the 50-week as well as the 200-week SMA, indicating that the bulls are still in control.
#8 Bullish Aroon: The weekly chart shows that the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
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 NVAX above the price of around $217.50. The rest of the shares can be purchased above the price of $240.00.
TP: Our target prices are $240 and $270 in the next 4-6 months.
SL: To limit risk, place stop-loss at $205.00 (for entry near $217.50) and $221.00 (for entry near $240.00). Note that the stop-loss is on a closing basis.
Our target potential upside is 10% to 24% in the next 4 to 6 months.
- Entry near $217.50: For a risk of $12.50, our target rewards are $22.50 and $52.50. This is a 1:2 and 1:4 risk-reward trade.
- Entry near $240.00: For a risk of $19.00, our target reward (TP#2) is $30.00. 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 from the symmetrical triangle 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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