Axsome Therapeutics Inc. (NASDAQ: AXSM) seems to be poised for a price surge as per its latest charts. The company engages in the development of novel therapies for central nervous system (CNS) disorders in the United States. The company’s product pipeline includes AXS-05, a therapeutic for the treatment of major depressive disorder and resistant depression disorders, which received proposed labeling from the FDA last Friday.
Bullish Indications
#1 Channel Breakout: The daily chart shows that the stock has currently broken out of a downtrend channel with high volume. This channel is marked in the chart as pink color lines. This is a possible bullish indication.
AXSM – Daily Chart
#2 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, indicating that the bulls are still in control. This is a positive indication.
#3 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 bullish.
#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Bullish Stoch: The %K (blue) line of stochastic is currently above the %D (Orange) line. This indicates possible bullishness.
#6 Consolidation Area: The weekly chart shows that the stock has been consolidating within a price range for the past few weeks. This area is marked as an orange color rectangle. The stock currently looks poised for a breakout. A breakout from a consolidation area typically indicates bullishness and the breakout level acts as a good support area. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
AXSM – Weekly Chart
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well. This is a possible bullish indication.
#8 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for AXSM is above the price of around $38.80.
TP: Our target prices are $50 and $56 in the next 3-6 months.
SL: To limit risk, place stop-loss at $33.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 29% to 44% in the next 3 to 6 months.
For a risk of $5.80, our target rewards are $11.20 and $17.20. 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 from the trend channel 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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