The Pasadena, California-based biopharmaceutical company whose products in development act through RNA interference mechanisms of action, Arrowhead Pharmaceuticals Inc. (NASDAQ: ARWR) seems to be showing signs of an upcoming price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been trading within a falling wedge pattern during the past few months. This is marked in the daily chart in pink color. A falling Wedge Patter is a bullish pattern. Once the stock moves up and breaks out from it, it has the potential to move further up. Currently, the stock has broken out of the falling wedge pattern, which is a bullish sign.
Daily Chart – ARWR
#2 Above MAs: The daily chart of ARWR shows that the stock is currently trading above its 50-day as well as 200-day SMA. This is a bullish sign.
This is a possible bullish indication.
#4 RSI Strong: Relative strength index (RSI) is currently above 50.
This indicates the strength of the current upmove.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating possible bullishness.
#6 Double Bottom Pattern: Within the falling wedge pattern, the stock is currently forming a double bottom pattern.
This is marked in the daily chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards.
#7 Flag Pattern: As seen from the weekly chart of ARWR, the stock was in an uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in purple color in the chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. Currently, the stock has broken out of the flag pattern which is a possible bullish sign.
Weekly Chart – ARWR
#8 RSI moving up: The RSI is above 50 and moving up on the weekly chart, indicating strength. The price is also above the 50-week and 200-week SMA. This implies that the bulls are still strong.
#9 Bullish Stoch: The weekly chart also shows that %K line of the stochastic is above the %D line. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of ARWR above the breakout level of the double bottom pattern. This translates to a price of around $16.10.
TP: Our target prices are $20 and $25 in the next 4 to 6 months.
SL: To limit risk, place the stop loss below $13.70. Note that stop loss is on a closing basis.
Our target potential upside is 24% to 55% in the next 4-6 months. For a risk of $2.40, our target rewards are $3.90 and $8.90. 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 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