Gritstone bio Inc. (NASDAQ: GRTS) seems to be gearing up for a surge as per its latest charts. Gritstone bio is a clinical-stage American biotechnology company engaged in developing tumor-specific cancer immunotherapies to fight various cancer types and infectious diseases. Its lead product candidate is GRANITE.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
GRTS – Daily Chart
#2 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 usually implies a possible bullish bias for the stock.
#3 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#4 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a possible bullish bias.
#5 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is starting to move higher from below the +DI and -DI lines.
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend and started a new uptrend. The downtrend line is shown in pink color. The stock is also currently trading above the 50-week SMA. All these are possible bullish indications.
GRTS – Weekly Chart
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line, indicating possible bullishness.
#8 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX is rising from below both (+DI) and (-DI).
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GRTS is above the price of around $13.50.
TP: Our first target price is $16, and if it closes above that level, the next target price is $18 in the next 3-6 months.
SL: To limit risk, place a stop loss at $11.90. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 19% to 33% in the next 3-6 months.
For a risk of $1.60, the target rewards are $2.50 and $4.50. This is a nearly 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 with high volume from the symmetrical triangle pattern. 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 its sector.
Happy Trading!
— Tara
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