Hello you very amazing and intelligent individuals that make up this forum. I sincerely hope you have had a pleasant week and doing well.
I usually use Dollar Cost Averaging to time my purchasing of stocks, so possibly for a few months i buy in batches. For instance the stock Crispr Therapeutics AG (NASDAQ: CRSP) has jumped out of a 6 month decline. I please wondered what technical indicators would usually indicate a move up from a downward spiral in the stock please? For instance could you use increasing volume, or whether any oscillators would be useful please? If anyone kindly had any advise please on how you can predict a stock bottom and a reversal it would mean the world to me and i would be forever grateful.
A very sincere very best wishes to you and i truly hope you continue to do amazing with your investing. Take care and hope you have an amazing life. All the best.
Its a complex question and you have to appreciate the limitations of technical analysis.
The humble moving average is actually one of the best trend indicators. 50MA and 200MA are commonly used by institutions.
You will never get chart analysis to tell you whether the current position is the end of a downtrend. It can create a great many signals to indicate that the price may increase in strength but it can’t say whether that is a short period of level price, a short rise followed by further downtrend or a true reversal. Certainly alone volume doesn’t give you direction.
In reality if you need to understand the reasons behind the current trend to be able to consider the likely long term possibility. Technical analysis is better for short term views but there are multiple chart patterns that do have high rates of success at either indicating continuation or reversals but they are often poorly analysed (ie people often see a cup and handle when all of the requirements for that pattern aren’t satisfied)
Just to give some further comment. You refer to CRSP. That had/has high short interest and moved without any significant notice that it would move up so strongly but the results are due tomorrow so one possible explanation is that the rise is at least in part due to shorts closing prior to results. There was very little in the chart to indicate such a strong move although 2 days prior the price opened well above the downtrend line (on my chart) but closed below it so that’s hardly convincing but in hindsight might have been shorts starting to close out but then letting the price drop back. The day before the rise there was a doji uncertainty candle (with another prior to the high opening the previous day) but they aren’t great indicators in themselves. The first day of the strong rise was interesting because it opened by strongly gapping up and then selling (perhaps take profit orders) dropped the price exactly to my downtrend line on my chart but it bounced back to close green. This combination was very bullish (strong gap up at open, drop to test trend/support line and close green) particularly given that it was a long tail. Thus that one candlestick sticks out and is a hammer candlestick.
Thus if I had spotted it and was bullish on CRSP long term based on fundamentals I would have taken it as a bullish signal. However, there are vey recent resistance at 44.68 and 47.14 and it tested neither of those levels but the next day it did test them opening and closing above the lower of the two and failing to break the higher. That it gapped up twice in a row and both times closed green was also very bullish.
I think that the last week chart for CRSP is pretty unusual. My suspicion is either there is good news or very good results and it is buying ahead of that or it is shorts closing to avoid the results risk (and traders knowing that and causing a short term short squeeze) or a combination of the two. I think to the naïve private investor (naive in the sense of not having inside information or market power) this means it is a fairly risky play now. If you saw the candlesticks last week you may have got in but it’s now entering overbought territory and without knowing the reasons behind the rise there is substantial risk. If the rise was due to shorts closing and a short squeeze then indifferent or poor results and the shorts may reappear. If shorts closed and results are average then it may avoid going back to a downtrend and adopt a sideways channel. If the results/news is good especially if shorts haven’t fully closed then its rising. Take your pick.
I think this highlights why its not a simple answer. No one approach will give you all of the answers. The chart analysis that I do was showing some divergence prior to the rise but the chart analysis prior to the rise would at best have been inconclusive.
Thank you very much WakeMeUp that was a very wonderful and detailed response. I am truly grateful for the time you took to reply to me, your response really means alot to me.
I understand from your response that the humble moving average is the best trend indicator including the 50MA and 200MA. The cup with handle pattern if interpreted correctly is also good for indicating continuation or reversals.
I am very grateful for the example you have provided with CRSP, it seems that once you have a checklist for analysing stocks on a technical basis, this would not guarantee you success. With CRSP it seems like it is the shorts closing their positions which has helped the stock move upwards. However, i understand there was a strong gap up at open, drop to test the trend/support line and a close green which was very bullish. However stocks need to be analysed on a case by case basis, as sometimes like with CRSP there is no simple answer.
You are a massive credit to these forums WakeMeUp and i am truly grateful for your answer to this. You are a very wonderful person. A very sincere very best wishes to you and hope you continue to do amazing with your investing. Take care.
There is no one indicator that I would say is the “best indicator”. I have written custom scripts to help with my chart analysis that incorporate aspects of several different indicators and technical analysis strategies.
In terms of the 50 and 200SMA they are widely used and therefore tend to be fairly good. Firstly they are good at indicating trends (ie above the MA is generally indicative of an up trend and below a downtrend).The issue with that comes at reversals, during sideways channels and when the price is volatile. Also depending on the length of the MA there is significant lag. So a 200 day MA the price will reverse and may move significantly before re-crossing the 200SMA. However, many institutions use it as a broad indicator and thus will not buy if the price goes below the 200SMA until they see a clear reversal.
The days around earnings/results are a special case and can be very hard to analyse.
It will be interesting to see what happens with CRSP over the next couple of weeks. I assume there will be some volatility.
From the results:
“The third quarter marked significant progress across our broad clinical pipeline of potentially curative gene edited therapies,” said Samarth Kulkarni, Ph.D., Chief Executive Officer and Chairman of the Board of CRISPR Therapeutics. “We are excited about the upcoming PDUFA date for exa-cel, which could potentially bring a transformative therapy to patients living with sickle cell disease. If approved, exa-cel would be the first CRISPR-based medicine available to patients in the U.S., highlighting the groundbreaking opportunity of this technology to treat people with serious diseases. Additionally, we are excited to initiate clinical trials for our in vivo programs, adding a new pillar to our clinical portfolio. We remain well positioned and well capitalized to bring several transformative medicines for patients suffering from serious diseases.”
It looks like there is a key milestone date in early December for exa-cel which is the first drug using CRSP’s technology and is a test drug for the tech. Thus I guess the next two months will be interesting and it will be interesting to keep an eye on the short interest
So CRSP did release good results and the price rose a bit before pulling back a little but then in the last week has risen very strongly. In part that due to the UK giving conditional approval to the Casgevy.
The price has ended up at a support resistance level so technically it wouldn’t be a surprise to see it bounce down before perhaps retesting the level. However, I think the UK approve is pretty significant for CRSP so I wouldn’t be surprised if it breaks the $68 on the first attempt and there is then resistance at $74, $80 and $84 (and obviously lots of levels above that)… Interestingly the bounce of $58.6 on the 7 Nov was exactly on a downward trend line (from the peaks on the 19 Jul 2022 and 23 May 2023) and an illustration that support resistance levels aren’t necessarily flat/level.
I have no idea what the current level of shorts is. Some website say there’s still a significant level of shorts (circa 18%) and T212 share lending says that there is medium demand. This really surprises me if shorts haven’t closed out already. If there are still shorts they must be feeling the squeeze. I don’t know if it went SSR on Friday (the rise was very close to the 10% threshold for SSR).
Personally I suspect that there may be a fairly good flow of news for CRSP. Slightly confused that 5 days ago Morgan Stanley reduced their price target on CRSP to $42 from $43 given that the current price is $68 (RBC target is $50 down from $55) but the company has a huge market cap and very little revenue so a concern would be what their cash position is but the recent results say that they have cash equivalents of $1.7billion. Thus I wonder why the analyst targets are significantly lower than the current price given good results and news.
Overall, personally I’m positive on CRSP (I hold)
hotel chocolate getting bought and halfords merger
Thank you very much for your detailed thoughts on CRSP WakeMeUp, i am very grateful for your opinions on this, it is exceptionally helpful and i am forever thankful.
I believe as this is a new drug advancement using Gene Editing there could be alot of excitement about this. I also saw this trending on alot of news sites regarding this company. I please wondered regarding a top-up on this company, would you wait to see if there is a pullback from the current high it has reached next week please? I also expect the positive news flow will continue and this is a really exciting company developing new products using Gene Editing. If you kindly had any thoughts on this i would be forever grateful and thankful i really appreciate your support.
Thanks again WakeMeUp for sharing your thoughts, you are the best person i have ever spoken to on any investment forum. You are detailed in your opinions and are a wonderful person. Hope you are enjoying your weekend and thanks very much for your opinions on this. All the very best.
@robertbanking I don’t about CRSP. I hold (well in profit now) and the price is at a resistance level but as you say there are a lot of reasons why the price could continue. I think it is definitely a case of everyone has to make their own decisions based on their own strategies, risk approach and portfolio. I think that there would be nothing wrong in taking some profit or doing a speculative sell with the hope of a small pullback to get a couple of % gain but equally there is good justification to simply holding to avoid the risk of it continuing a very strong rise. In the chart there is no real indication that it has run out of steam. If I look at the 5 minute chart it did pull back VERY slightly at the end of trading on Friday but until the last year of trading was continuing to make higher highs and even at the end was making higher lows. Thus the three main reasons for thinking that it might pull back are 1) fear of losing the profit (purely emotive but understandable), 2) the resistance level at 68 and 3) the fact that it has had a strong rise and at some points nothing rises forever. The strongest resistance level is 84 (with another at 74).
@robertbanking I did reply to you about Ryanair on the Arcutis thread (4 hours ago) but it is saying that my long reply needs approval!