The China-based company expanding its US footprint with a State of New York funded R&D space in Buffalo, Athenex Inc. (NASDAQ: ATNX) 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 ATNX, the stock has been forming a falling wedge pattern for the past few months. This is marked as purple 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 – ATNX
#2 RSI Strong: Relative strength index (RSI) is currently above 50. This indicates the strength of the current upmove.
#4 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 buy signal.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX and (+DI) are above (-DI).
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a short-term downtrend.
The downtrend line is marked in purple color. This is a bullish sign.
Weekly Chart – ATNX
#7 Double Bottom Pattern Breakout: The weekly chart shows that the stock had formed a double bottom pattern. This is marked 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. Currently, the stock has broken out of the double bottom pattern, indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of ATNX at the current price of $13.92 and the rest if the stock closes above $15.
TP: Our target prices are $18 and $23 in the next 4-6 months.
SL: To limit risk, place a stop loss below $11.50 (for entry near $13.92) and $13.00 (for entry near $15). Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 65% in the next 4-6 months.
- Entry near $13.92: For a risk of $2.42, our first target reward is $4.08 and the second target reward is $9.08. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $15: For a risk of $2.00, our first target reward is $3.00 and the second target reward is $8.00. 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 energy sector.
Happy Trading!
Tara
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