Moderna, Inc (NASDAQ:MRNA) was trading over 8% higher at one point on Monday morning, bouncing up within a descending channel pattern on the daily chart.
In the pattern, a stock makes a series of lower lows and lower highs between two parallel trendlines. The pattern is bearish for the short term, but can be bullish down the road.
- For bearish traders, the "trend is your friend" (until it's not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
- Bullish traders will want to watch for a break through the upper descending trendline, on high volume, for an entry. When a stock breaks above a descending channel, it's a powerful reversal signal and indicates a rally is likely in the cards.
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The Moderna Chart: In the downtrend between the parallel trendlines, Modern’s most recent lower high was printed on Friday at $146.45 and the most recent lower low was formed at the $134.19 level on that same day. On Monday, Moderna was spiking up higher and attempting to regain support at the eight-day exponential moving average.
- Moderna’s price action on Monday was taking place completely within Friday’s trading range, which has caused the stock to print an inside bar pattern on the daily chart. The inside bar is neutral in this case, and traders and investors can watch for a break up or down from the inside bar later on Monday or on Tuesday to gauge future direction.
- If Moderna closes the trading day near its high-of-day price, it will print a bullish Marubozu candlestick, which could indicate higher prices are in the cards for Tuesday. If the stock breaks up bullishly from the inside bar pattern and the falling channel, Moderna will regain support at the 21-day EMA and the 50-day simple moving average, which would give bulls more confidence going forward.
- On Monday, Moderna’s relative strength index (RSI) was measuring in at about 43%, which indicates the stock has room to move in either direction without becoming oversold or overbought. If Moderna closes the trading session near its high-of-day, the stock’s RSI will have crossed above its average, which could be a positive sign for the bulls.
- Modern has resistance above at $147.57 and $179.54 and support below at $122.01 and $97.80.
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