The biopharmaceutical company located in San Diego, California, Ligand Pharmaceuticals Inc. (NASDAQ: LGND) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart of LGND, the stock has been forming a falling wedge pattern for the past several weeks. This is marked in purple color lines. A falling wedge is a bullish pattern and a breakout from it indicates that the stock may move higher. The stock has currently broken out of the falling wedge pattern, indicating possible bullishness.
Daily Chart – LGND
#2 Double Bottom Pattern: The stock is currently forming a double bottom pattern in the daily chart. This is marked in the daily chart in pink color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.
[hana-code-insert name=’adsense-article’ /]#3 Price above MA: The stock is currently above the 50-day SMA, indicating that the bulls are currently gaining control.
#4 Bullish ADX and DI: The ADX indicator shows bullishness as (+DI) is greater than (-DI) and the ADX line is rising.
This points to a possible upmove in the near-term.
#5 Bullish RSI: The RSI is above 50 in the daily chart and moving up. This indicates possible bullishness.
#6 Near support Area: The weekly chart shows that the stock is currently moving up after taking support at a very strong support area.
This area is marked in a green rectangle. The stock had formed a high volume long-tailed candle at that area before bouncing back from the short-term downtrend. This is a possible bullish indication.
Weekly Chart – LGND
#7 Bullish Stochastic: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 MACD Above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level purchasing the shares of LGND is above the breakout level of the double bottom pattern at around $130. But for those with a higher risk appetite, you can purchase half the intended quantity of shares at the current price of $123.46.
TP: Our target prices are $140 and $150 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $125 (for entry near $130) and $117.60 (for entry near $123.46). Note that the stop loss is on a closing basis.
Our target potential upside is 8% to 22% in the next 3-6 months.
- Entry near $123.46: For a risk of $5.60, our first target reward is $16.54 and the second target reward is $26.54. This is a nearly 1:3 and 1:5 risk-reward trade.
- Entry near $130: For a risk of $5.00, our first target reward is $10.00 and the second target reward is $20.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with 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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