Long-Term Outlook For Intellia Therapeutics: October 9, 2018

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About: Intellia Therapeutics (NTLA)
by: The Freedonia Cooperative

Summary

NTLA has shown sustained growth since May 2017.

The candle for the week ended October 5, 2018 closed bearish, and found support at the ascending support trend line at $24.34.

Middle-term outlook on weekly charts is bullish; price should will test the next available resistance area at $32, and then $34.

Intellia Therapeutics (NASDAQ:NTLA) is a genome editing company focused on developing pharmaco-therapeutic solutions to genetically linked diseases such as cancer and immunological diseases using the Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR/Cas9) gene-editing technology.

Fundamental Outlook

The stock price has shown sustained growth since May 2017. Its share price grew from just above $12 to a high of $36 in March 2018, before a poor Q1 2018 earnings report sent the price spiraling downwards. It has gradually picked up steam as progressive developments in genome editing have continued to excite investors and market stakeholders. It has competition from companies such as CRISPR Therapeutics AG (CRSP) and Editas Medicine (EDIT). Intellia Therapeutics is scheduled to make some presentations at several October Healthcare Investor Conferences. The contents of the presentations may impact the stock price of NTLA.

Technical Outlook

The weekly chart shown below displays the long-term outlook on the NTLA stock as of October 9, 2018. The price pattern on the chart is contained within two converging trend lines, which define both the highs and lows of price action. This is therefore a symmetrical triangle pattern.

NTLA Weekly Chart: October 8, 2018

The symmetrical pattern is a continuation pattern in most cases. Therefore, the pattern is expected to conclude with the breakout of price from the trend line which is located on the opposite end of the long-term price move. However, this is not always the case, and news releases can push prices to breakout in a direction which opposes the trend.

The candle for the week ended October 5, 2018 closed bearish, and found support at the ascending support trend line at $24.34. This area also corresponds to the horizontal support within the symmetrical triangle, marking areas where weekly candles found support in June and July 2018. The daily chart below shows how the week starting October 8, 2018 has begun.

Price action on the horizontal support line is critical and will determine how the week will play out. So what are the trade scenarios for NTLA going forward?

Trade Scenario 1

The expectation is that the candle for the week should be able to find support at $24.34. If it does (i.e. the candle does not close the week below the ascending support trend line, then the price action will resume the next leg of the price move upwards, and that will be to the resistance trend line. In this manner, price will move back and forth between these trend lines for several weeks until a distance of 75% between the triangle base and apex has been reached. At this time, price will be due for a breakout.

Trade Scenario 2

A breakout that occurs earlier than usual is also on the cards, especially if the next earnings report surprises the market. Such a surprise could be negative or positive, and could push the price to perform a downside or upside breakout. The next earnings report is due on October 30, 2018; barely three weeks away. Traders should watch that date for the numbers, as it may decide the medium-term price direction for NTLA.

If the price action eventually breaks to the upside, it must be accompanied by an increase in buying volume (long green volume bars), and will first test the next available resistance area at $32, and then $34. If the triangle resolves with a downside break, this move does not necessarily need volume confirmation, and will find support at the $20 mark.

As a rule, downside breaks of the symmetrical triangle tend to result in more aggressive moves than an upside break.

Market Sentiment:

The long-term and mid-term outlook for NTLA is:

  • Long Term - Neutral
  • Mid-term - Bullish

The long-term market sentiment as seen on the weekly chart is neutral, because price is expected to continue trading within the symmetrical triangle with no clear trend direction. The medium-term outlook is bullish, as price is expected to push upwards from its present support level of $24.34, at least to the opposing trend line at the $30 mark.

Please note: this analysis was done on a weekly chart. It takes a whole week for a candle to form, so the price moves described above may take several weeks to play out. Entries should be made on shorter time frame charts such as the daily chart or the hourly chart.

Disclosure: I am/we are long NTLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.