The stock price of Intellia Therapeutics (NTLA) was able to break below the symmetrical triangle identified in the last analysis and has tracked down to the support levels that were identified below that triangle. Presently, the price action has broken below the support and has undergone a slight pullback to the broken support. However, we need to know if the breakout had sufficient momentum to take NTLA to new lows, or if the price will recover as we head into the last month of the year.
Intellia’s Q3 earnings results were mixed, as investors are apparently still not convinced of the company’s ability to compete with other established firms like Editas (NASDAQ:EDIT) and Crispr (NASDAQ:CRSP) in the area of genome-editing research and treatments. This is reflected in the underperformance of the company’s stock in 2018, when compared to competitors like EDIT and Vertext (NASDAQ:VRTX). The company remains in the hand of high-profile owners like Vangaurd, though large-scale selloffs have sent prices plummeting this year. Its largest owner, however, recently bought more ownership in NTLA, a potentially optimistic sign at current price points.
The company continues to perform its research and released some new data at the 26th Annual Congress of the European Society of Gene and Cell Therapy (ESGCT) in Lausanne, Switzerland.
The weekly chart shown below displays the long-term outlook on the NTLA stock as we head into December 2018. The price of NTLA is now resting on a key area of support after a brief break and pullback to the broken support line.
NTLA Weekly Chart: December 2, 2018
The chart shows that the price level of $17.94 is a key price level that has at various times served as support and resistance. Role reversals have occurred after breaks of this level by the price action at various times in the last 26 months. Price action closed below this price level in the week ending Nov. 16, with further downside the next week. However, price action has started to tick back up in a pullback movement, and this has been stopped at the broken support line (now acting as a resistance).
So the question essentially is: did this breakout have enough momentum to take prices down south? Let’s review the trade scenario.
Trade Scenario 1: Possible Breakdown of the $17.94 Support Area
A break of price action must be confirmed using any of the various filters available: Time, volume, volatility or percent penetration. Some authorities also use the number of candle closes in the breakout territory as a confirmation filter. Otherwise, the price move will be deemed not to have enough momentum to follow through with the expected trend movement. One of the methods used in determining if a breakout is real or fake is by using the 3% price penetration rule. Looking at the chart, we see that the asset has obeyed the 3% rule, and has also fulfilled the double candle close condition. So it's safe to say that the broken support should be able to resist any attempts by price action to return to the previous range, and price action is expected to start heading south.
If this is the case, then we expect price in the next few weeks to approach the next minor support at just above $15.
Trade Scenario 2
If for some reason (such as some unexpectedly strong sector news) the price returns to the previous range, then it will make a dash for the next resistance located at $20. Price may even hit this mark and resume its downward trend once more. Supporting this view is the picture on the four-hour chart, which shows a saucer pattern that can be seen below, with price pushing against the price level that constitutes the broken support on the weekly chart.
NTLA 4-hour chart: December 3: 2018 (Pre-market)
This move is expected to last only a few days, and could still occur even if the long-term focus remains bearish.
The long-term and mid-term outlook for NTLA is:
- Long-Term – bearish
- Mid-term – mildly bullish
The long-term market sentiment as seen on the weekly chart is bearish, because price is expected to be resisted at the broken support to continue the downward breakout move of price action. The short-term outlook is bullish as price is expected to push upwards from the saucer’s upper border in a move that could possibly be a continuation of the pullback attempt on the weekly chart.
Please note: this analysis was done on a weekly chart and 4-hour charts. It takes a whole week for a candle to form on the weekly chart, so the price moves described for that chart may take several weeks to play out. Moves on the 4-hour chart will occur within the context of the big picture and will last only a few days.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.