The American pharmaceutical company developing products that treat iron deficiency anemia in adult patients, AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG) seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart of AMAG, the stock has been forming a falling wedge pattern for the past few months. This is marked as pink color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – AMAG
#2 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 as a potential bullish signal.
[hana-code-insert name=’adsense-article’ /]#3 Price above MA: The price is currently above the short-term moving average of 50-day SMA.
This usually implies a possible bullish bias for the stock.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
#5 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend.
The downtrend line is marked in orange color. This is a possible bullish sign.
Weekly Chart – AMAG
#6 Bullish Stoch: The %K line is above the %D line of the stochastic and it has moved from oversold, indicating possible bullishness.
#7 Bullish RSI: The Relative strength index (RSI) was moving up from oversold levels and is now above 50 and moving higher in the weekly chart. This shows the strength of the current upmove.
#8 Bullish MACD: The MACD line is above the signal line in the weekly chart as well, indicating a possible bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of AMAG at the current price of $11.83.
TP: Our target prices are $17 and $24 in the next 4-6 months.
SL: To limit risk, place a stop loss below $8.35. Note that the stop loss is on a closing basis.
Our target potential upside is 44% to 102% in the next 4-6 months.
For a risk of $3.48, our first target reward is $5.17 and the second target reward is $12.17. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x 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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