Dynavax Technologies Corporation (NASDAQ: DVAX) seems to be poised for a price surge as per its latest charts. The biopharmaceutical company focuses on developing and commercializing novel vaccines in the United States.
The stock was also a part of our recent watchlist for breakout stocks.
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was recently forming a falling wedge pattern. These are marked as purple color lines. The stock has currently broken out of the falling wedge pattern and has moved higher. A falling wedge is a bullish pattern and a breakout from it implies that the stock surge in the short term.
#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 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has moved up from below –DI and +DI lines. This indicates possible bullishness.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#5 Flag Pattern Breakout: The weekly chart shows that the stock was in an uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked on the chart in pink color. Currently, the stock has broken out of the flag. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). The stock is also trading above its 50-week and 200-week SMA. All these are possible bullish indications.
#6 Bullish ADX and DI: The ADX indicator shows bullishness in the weekly chart as well, as the +DI line is currently above the –DI line, and the ADX line is moving up from below –DI and +DI lines.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of DVAX above the price of around $17.
TP: Our target prices are $20 and $23 in the next 3-6 months.
SL: To limit risk, place stop-loss at $15.30. Note that the stop-loss is on a closing basis.
Our target potential upside is 18% to 35% in the next 3 to 6 months.
For a risk of $1.70, our target rewards are $3.00 and $6.00. This is a nearly 1:2 and 1:4 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 falling wedge 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.
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