The medical research and drug development company with corporate offices and research facilities in Cambridge, Massachusetts, Sarepta Therapeutics Inc. (NASDAQ: SRPT) seems to be ready for a price surge in the near-term.
Bullish Indications
#1 Channel Breakout: The daily chart of SRPT shows that the stock was trading within a downtrend channel for the past few months. This channel is marked on the daily chart in purple color. Currently, the stock has broken out of the channel. This seems like a possible bullish indication.
#2 Above Support Level: The daily chart shows that the stock is currently trading above a strong support level. This level is marked as a pink dotted line. This seems like a good area for the stock to bounce back higher.
Daily Chart – SRPT
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
[hana-code-insert name=’adsense-article’ /]#4 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#5 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#6 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#7 Flag Pattern: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern and is marked in the chart in purple color.
A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case).
Weekly Chart – SRPT
#8 Rising Stochastic: The %K line is currently above the %D line in the stochastic. This indicates possible bullishness.
#9 RSI Strong: Relative strength index (RSI) is currently above 50 after moving up from oversold levels in the weekly chart. This indicates the strength of the current upmove.
#10 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. SRPT has currently taken support at 50% Fibonacci support level as seen in the weekly chart. The stock is also trading just above its 50-week and 200-week SMA. So, this seems like a good area for the stock to bounce upwards.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of SRPT at the current price of $122.80.
TP: Our target prices are $140 and $150 in the next 3-6 months.
SL: To limit risk, place a stop loss at $113.40. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 14% to 22% in the next 3-6 months. For a risk of $9.40, our first target reward is $17.20 and the second target reward is $27.20. 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 channel breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
Happy Trading!
Tara
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