Catalent, Inc. (NYSE: CTLT) seems to be poised for a price surge as per its latest charts. The company develops and manufactures solutions for drugs, protein-based biologics, cell and gene therapies, and consumer health products worldwide. It operates in two segments, Biologics, and Pharma and Consumer Health.
Bullish Indications
#1 Breakout from Consolidation area: The daily chart shows that the stock had been consolidating within a price range for the past few days. This area is marked as a pink color rectangle. The stock has now broken out from this consolidation area with high volume and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level.
CTLT – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#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 indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below the –DI and +DI lines. 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 Downtrend Channel Breakout: As you can see from the weekly chart, the stock had been trading within a downtrend channel during the past few weeks. This is marked in the chart in pink color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
CTLT – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating 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 as well. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of CTLT above the price of around $60.60.
TP: Our target prices are $67 and $72 in the next 3-6 months.
SL: To limit risk, place stop-loss at $57.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 11% to 19% in the next 3 to 6 months.
For a risk of $3.60, our target rewards are $6.40 and $11.40. 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 from the trend channel 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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