The Waltham, Massachusetts-based biotechnology company, Deciphera Pharmaceuticals Inc. (NASDAQ: DCPH) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few weeks. This is marked in the daily chart in orange color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – DCPH
#2 Channel Support: The stock has been trading within an uptrend channel for the past several months. This channel is marked on the chart in purple color lines. The stock has currently taken support at the lower end of the channel before bouncing up again. This seems like a good support level.
[hana-code-insert name=’adsense-article’ /] #3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color).This is a possible bullish setup.
#4 Above MA: In the daily chart of DCPH, the stock is currently trading above both 50-day as well as 200-day SMA.
This implies that the bulls are currently in control.
#5 Strong RSI: The daily chart shows that RSI is above 50 and moving up, indicating strength.
#6 %K above %D: The %K line is above the %D line in the stochastic. This is a bullish sign.
#7 Unbroken Uptrend in Weekly Chart: As evident from the weekly chart, the stock is in an uptrend as it has been making higher highs and higher lows for the past several weeks. The stock is also above its 20-week SMA.
Weekly Chart – DCPH
#8 Strong RSI: The RSI is above 50 and moving up. This is a bullish sign.
#9 Flag Pattern breakout: The stock was in a strong uptrend, after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. This pattern is marked in purple color on the weekly chart. Once the stock breaks out of the flag pattern, it has the potential to move further up. Currently, the stock has broken out of the flag pattern.
#10 Bullish Stochastic: The weekly chart shows that the %K line is above the %D line in the stochastic. This indicates that an upmove may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for DCPH is at the current price of $38.55.
TP: Our target prices are $45 and $55 in the next 4-6 months.
SL: To limit risk, place stop-loss at $34.90. Note that the stop loss is on a closing basis.
Our target potential upside is 17% to 43% in the next 4-6 months. For a risk of $3.65, our target rewards are $6.45 and $16.45. This is an almost 1:2 and 1:5 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 from the channel and the falling wedge 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
[hana-code-insert name=’investorplace-article2′ /]