The animal health company that innovates, develops, manufactures, and markets products for companion and food animals, Elanco Animal Health Inc. (NYSE: ELAN) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The stock has currently broken out of a Symmetrical Triangle pattern which is a possible bullish sign. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple color lines.
Daily Chart – ELAN
#2 Trading above MAs: The price is currently above its short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA. This implies a possible bullish bias for the stock.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color).
This is a possible bullish setup.
#4 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines.
The +DI line is also currently above the –DI line. This indicates possible bullishness.
#5 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.
#6 Ascending triangle pattern: The weekly 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 weekly chart in pink color lines. A breakout from this pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout.
Weekly Chart – ELAN
#7 Bullish MACD: The MACD line is currently above the MACD signal line in the weekly chart as well, indicating possible bullishness.
#8 Bullish RSI: The RSI is above 50 and moving up, indicating the strength of the current upmove.
#9 Bullish Aroon: In the weekly chart as well, the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30, indicating overall bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ELAN is if the stock crosses above $27.80.
TP: Our target prices are $32 and $36 in the next 3-6 months.
SL: To limit risk, place a stop loss at $25.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 15% to 30% in the next 3-6 months.
For a risk of $2.80, the target rewards are $4.20 and $8.20. This is a nearly 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 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