Pacific Biosciences of California Inc. (NASDAQ: PACB) seems to be poised for a price surge as per its latest charts. The American biotechnology company designs, develops, and manufactures sequencing systems for gene sequencing and some novel real-time biological observation, aimed at resolving genetically complex problems.
#1 Channel Breakout: The daily chart shows that the stock has currently broken out of a downtrend channel with a high volume. This channel is marked in the chart as pink color lines. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are gaining 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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Above Support Area: As you can see from the weekly chart, the stock is currently moving higher from a support area. This level is marked as a purple dotted line. This looks like a good area for the stock to move higher.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.
#9 Bullish ADX and DI: The weekly chart shows that the +DI line has currently crossed above the –DI line and the ADX line has moved up from below the –DI and +DI lines. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PACB above the price of around $8.20.
TP: Our target prices are $10.50 and $13 in the next 2-6 months.
SL: To limit risk, place stop-loss below $7.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 28% to 59% in the next 2 to 6 months.
For a risk of $1.20, our target rewards are $2.30 and $4.80. 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 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.
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