The clinical-stage biotechnology company that focuses on harnessing the body’s innate biology to repair or reverse damage caused by a broad range of degenerative diseases, Frequency Therapeutics Inc. (NASDAQ: FREQ) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Flag Breakout: As you can see from the daily chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in orange 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).
Daily Chart – FREQ
#2 Price above MA: The stock is currently trading above the short-term moving average of 50-day SMA. This indicates that the bulls are slowly gaining control.
#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 as a potential buy signal.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines, while the +DI line is currently above –DI line.
All these indicate possible bullishness.
#6 Fibonacci Support: The weekly chart shows that the stock has currently bounced back higher after taking support at the 23.6% Fibonacci level. The stock is currently above the 38.2% Fibonacci level and moving higher. This is a possible bullish sign.
Weekly Chart – FREQ
#7 Bullish RSI: The weekly chart shows that the RSI is currently above 50 and moving higher, indicating the strength of the current upmove.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart. It is also moving up from oversold levels. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for FREQ is if it trades above the price of around $20.
TP: Our target prices are $24 and $28 in the next 4-6 months.
L: To limit risk, place a stop loss below $17.30. Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 40% in the next 4-6 months.
For a risk of $2.70, our first target reward is $4.00 and the second target reward is $8.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the flag pattern with 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 energy sector.
Happy Trading!
Tara