The clinical-stage pharmaceutical company that focuses on the discovery, development, and commercialization of therapeutics for rare endocrine diseases and endocrine-related tumors, Crinetics Pharmaceuticals Inc. (NASDAQ: CRNX) seems to be ready for a surge as per its latest charts.
Bullish Indications
#1 IH&S Breakout: As you can see from the daily chart, the stock has recently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
Daily Chart – CRNX
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently 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 bullish bias.
#4 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.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has risen above (+DI) and (-DI).
#6 Symmetrical triangle pattern breakout: The weekly chart shows that the stock had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the weekly chart as purple lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
Weekly Chart – CRNX
#7 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating bullishness.
#8 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line, which is a bullish signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CRNX is if the stock corrects to a price of around $20.
However, you can purchase half the intended quantity of shares of CRNX if it trades above the previous day’s price, at around $23.70.
TP: Our target prices are $27 and $32 based on the breakout from the Symmetrical Triangle pattern.
SL: To limit risk, place a stop loss at $17.60 (for entry near $20) and $21.45 (for entry near $23.70). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 14% to 60% in the next 4-6 months.
- Entry near $20: For a risk of $2.40, the target rewards are $7.00 and $12.00. It is a nearly 1:3 and 1:5 risk-reward trade.
- Entry near $23.70: For a risk of $2.250, the target rewards are $3.30 and $8.30. It is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. 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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