The clinical-stage immunology-based biopharmaceutical company, Rapt Therapeutics Inc. (NASDAQ: RAPT) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart shows that the stock had recently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – RAPT
#2 Trading Above MA: The stock is currently trading above its 50-day SMA, which implies that the bulls are currently in 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 bullish.
#4 Bullish ADX: The ADX line has started to move up from below –DI and +DI lines.
The +DI line and the ADX lines are also currently above –DI line.
This indicates possible bullishness.
#5 Bullish Stoch: The %K line of the stochastic is currently above the %D line in the daily chart, indicating bullishness.
#6 Double Bottom Breakout: The weekly chart shows that the stock has recently broken out from a double bottom pattern. This is marked in orange color in the chart. A double bottom is a bullish pattern and a breakout from it indicates that the stock may move higher in the near-term.
Weekly Chart – RAPT
#7 Bullish ADX: In the weekly chart as well, the ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above –DI line. This indicates possible bullishness.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of RAPT is if the stock corrects to the price of around $25.
For immediate entry, you can purchase half the intended quantity of the shares if the stock trades above yesterday’s close, which translates to a price above $28.30.
TP: Our target prices are $30 and $38 in the next 3 to 5 months.
SL: To limit risk, place a stop loss around $21.60 (for entry near $25) and $23 (for entry near $28.30). Note that this stop loss is on a closing basis.
Our target potential upside is 20% to 52% in the next 3-5 months.
- Entry at $25: For a risk of $3.400, the target rewards are $5.00 and $13.00. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry at $28.30: For a risk of $5.30, the target reward (TP#2) is $9.70. This is a nearly 1:2 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 with high volume from the ascending triangle breakout level. 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 its sector.
Happy Trading!
Tara
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