The biotechnology company focused on developing and commercializing innovative, empowered monoclonal antibody-based therapies for the treatment of cancer, Seattle Genetics, Inc. (NASDAQ: SGEN) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has recently formed a rising wedge pattern during the past few months. This is a bearish pattern and is marked in purple color dotted lines in the daily chart. Once a stock breaks down from the bottom of the rising wedge pattern, it typically moves lower in the near-term.
Daily Chart – SGEN
#2 Double Top Pattern: The daily chart indicates that the stock had recently formed a double top pattern. It is a bearish pattern and is marked in pink color in the daily chart.
Once the stock breaks down from a double top pattern, it typically moves lower in the near-term.#3 Overbought RSI: The RSI is near overbought levels in the daily chart.
This is a possible bearish sign.
#4 Supply area: The weekly chart shows that the stock is currently near a supply area, which is marked as an orange ellipse.
The stock had formed long tails during the past few weeks but was not able to cross above this level. Whenever the stock attempted to cross above the top of this supply area, it bounced back down, indicating that there is a distribution happening at this level. This is a bearish sign.
Weekly Chart – SGEN
#5 Bearish Divergence between RSI and Price: The daily chart shows that there is a bearish divergence between RSI and price. This is because while the price was making higher highs, RSI was forming lower highs. This usually indicates the possibility of an upcoming bearish move. The bearish divergence is marked as blue color dotted lines in the chart.
#6 Bearish MACD: The MACD line is currently below the MACD signal line in the weekly chart. This is a possible bearish sign as well.
#7 Bearish RSI: The RSI is currently nearing overbought levels. This is also a possible bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level of SGEN is below $120.
TP: Our target prices in the next 3-6 months are $110, and if it crosses below that price, $100.
SL: To limit risk, place a stop loss at $126.50. Note that this stop loss is on a closing basis.
Our target potential downside is 8% to 17% in the next 3-6 months.
For a risk of $6.50, our target rewards are $10.00 and $20.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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