The clinical-stage biopharmaceutical company that focuses on the development and commercialization of various therapies for the treatment of liver and cardio-metabolic diseases, 89bio Inc. (NASDAQ: ETNB) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: As you can see from the daily chart, the stock was forming a symmetrical triangle pattern for the past few months. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This is marked as purple color lines. The stock has currently broken out of the symmetrical triangle. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
Daily Chart – ETNB
#2 Price above MA: The daily chart shows that the stock is currently trading above its short-term moving average of 50-day SMA. This is a bullish sign.
#3 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color), and is also moving higher from oversold levels. This is a possible bullish indication.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX is starting to move up from below (-DI) and (+DI).
#5 Bullish Stoch: The %K line of the stochastic is above the %D line in the daily chart. The stoch indicator is also moving up from oversold levels. All these indicate possible bullishness.
#6 Above Support Area: As you can see from the weekly chart, the stock had recently bounced higher from a strong support area. This area is marked as an orange color dotted line. This is a possible bullish sign.
Weekly Chart – ETNB
#7 RSI Strong: Relative strength index (RSI) is currently moving up from oversold levels and has crossed above 50. This indicates the strength of the current upmove.
#8 MACD above Signal Line: The weekly chart also shows that the MACD (light blue color) is currently above the MACD signal line (orange color), indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ETNB is above the price of $30.00.
TP: Our target prices are $35 and $40 in the next 4 to 6 months.
SL: To limit risk, place the stop loss below $26.60. Note that stop loss is on a closing basis.
Our target potential upside is 17% to 33% in the next 4-6 months.
For a risk of $3.40, our target rewards are $5.00 and $10.00. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern 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.
Happy Trading!
— Tara
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