Why Veru can be set to double, triple its price and how to play this consolidation pattern

Veru Inc. VERU soared 235% at one point on Monday before closing the trading session up more than 180% from Friday’s closing price. On Tuesday, the stock consolidated the move higher by establishing an inside bar pattern on the daily chart.

MondayVeru has announced the results of its phase 3 study of its COVID-19 drug, Sabizabulinwhich showed that the drug reduced the number of deaths by 55% of hospitalized patients at risk of acute respiratory distress syndrome. The oncology biopharmaceutical company plans to file an Emergency Use Authorization request with the FDA.

Analysts reacted positively to the news by raising their price targets for the stock on Tuesday. HC Wainwright & Co. maintained a long on Veru and raised the price target to $24, while Oppenheimer maintained its outperform rating on the stock and raised the price target to $36.

If Veru were to hit the lower of the two price targets, that would still represent an increase of around 138% from the current share price, which the stock could reach if it breaks an uptrend developing on the market. daily chart after a period of consolidation takes place.

When a stock moves too quickly in either direction, profit takers come into play, which usually results in a period of consolidation before a continuation move or reversal occurs. Although Veru appears poised to rise even higher, the stock may need to cool a number of indicators before bullish traders not currently in position feel comfortable enough to buy back.

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Veru’s chart: On Tuesday, Veru opened higher but ran into sellers and profit takers, which helped send the stock down around 17% by mid-afternoon. Price action was completely within range on Monday, however, which caused an inside bar to develop on the daily chart. The inside bar is bullish because the stock was trading higher before forming the pattern.

  • The surge prompted Veru to extend eight-day and 21-day exponential moving averages (EM) as well as 50-day and 200-day simple moving averages (SMA), indicating that a longer period of consolidation long might be needed. If Veru is able to trade above the 200-day SMA for some time, the 50-day SMA will move back above the 200-day, creating a golden cross on the chart.
  • Traders and investors can watch as one or more inside bars continue to develop between Monday’s trading range while the moving averages tend to rise to catch up with the stock price. Traders looking to take a position can choose to wait for a break up or down from Monday’s parent bar to gauge future direction.
  • If Veru continues to develop a series of inside bars, traders and investors can watch for diminishing volume, which could indicate the stock is running out of buyers and sellers as it prepares for another move. on the rise.
  • On Tuesday, Veru was trading in above-average volume, with more than 76 million shares traded by mid-afternoon, compared to a 10-day average of 42.59 million, indicating that a large number of sellers exited their positions.
  • Veru has resistance above at $11.18 and $12.80 and support below at $9.95 and $8.30.

See also: How to read candlestick charts for beginners

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