The discovery-phase pharmaceutical company based in Cambridge, Massachusetts which aims to develop therapies based on CRISPR–Cas9 gene editing technology, Editas Medicine Inc. (NASDAQ: EDIT) seems to be ready for an upmove in the near term as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern during the past few months. This is marked in purple color in the daily chart. A falling wedge is a bullish pattern. Once the stock breaks out of the top of the pattern, it may move higher in the near-term. Currently, the stock has broken out of the falling wedge pattern, indicating bullishness.
Daily Chart – EDIT
#2 Bullish RSI: The daily chart shows that the RSI is currently above 50. This indicates strength.
This is a possible bullish setup.
#4 Above MA: The stock has currently crossed above its 50-day SMA, indicating that the bulls are gaining an upper hand.
#5 %K above %D: The %K line of the stochastic is currently above the %D line in the daily chart, indicating bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
EDIT had taken support at the 38.2% Fibonacci support level of the upmove, as seen in the weekly chart. It is currently moving up from that support area. This seems like a bullish sign.
Weekly Chart – EDIT
#7 %K above %D: The stochastics show that the %K line is currently above the %D line in the weekly chart. This is a bullish sign.
#8 Oversold RSI: The weekly chart shows that the RSI is currently moving upwards after reaching oversold levels. This points to a possible bullish reversal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of EDIT is if it crosses above $29.80. For those with a higher risk appetite, you can purchase half the intended quantity of shares of EDIT at the current price of $29.37.
TP: Our target prices are $38 and $45 in the next 4-6 months.
SL: To limit risk, place a stop loss at $25.50. Note that this stop loss is on a closing basis.
Our target potential upside is 28% to 53% in the next 4-6 months.
- Entry at $29.37: For a risk of $3.87, our target rewards are $8.63 and $15.63. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry at $29.80: For a risk of $4.30, our target rewards are $8.20 and $15.20. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 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 edge 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 its sector.
Happy Trading!
Tara
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