CRISPR Should Continue The Bullish Pace From 2019 – CRISPR Therapeutics AG (NASDAQ:CRSP)

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CRISPR Therapeutics (CRSP) rode to new heights last year, though the end of 2019 saw this stock suddenly start to shed a lot of weight. CRSP’s selloff has continued into the new year, leaving investors wondering what happened to the bullishness of Crispr-Cas9 technology and its potential. The outlook for CRSP is presented in this piece, so investors can make some sense of some of the price movements that have been seen and also find out what lies in store.

Fundamental Analysis

CRSP announced its 4th quarter results on Thursday, February 13, 2020. The results showed a better-than-expected quarterly earnings of $0.51 per share, which totally blew the consensus number of $0.04 per share out of the water. This was also a significant improvement over the same period a year earlier, when the company posted a loss of $0.92 per share. This result is a 1,175% jump above estimates and represents the second time in four quarters that the actual earnings number has beaten the estimate.

CRSP continues to advance on its milestones on several fronts. Positive interim data from two patients with severe haemoglobinopathies (sickle cell disease and beta-thalassemia) following clinical trials with CTX-001 has spurred excitement in the medical community. Enrollment for continued clinical trials in 2020 is ongoing and the company has said it will provide more data as these become available.

There are several reasons for investors to be bullish on CRSP, and those have likely led to the stock recovering from its low of $30 at the beginning of 2019. It will have competitors in the gene editing space, but if the space proves to be worth its potential, there will be room for big players to drastically increase revenue.

Technical Analysis

CRSP’s monthly chart reveals that the February candle is a bullish one. Within the context of the long-term trend, this candle could hold the key to checkmating the correction which began in December 2019 and continued into January 2020.

CRSP Monthly Chart: February 2020

The monthly candle bounced off the lower border of the smaller descending channel. The February 2020 monthly candle has to close above the upper border of the smaller channel with a 3% penetration to provide a positive signal for the continuation of the uptrend. However, another monthly candle close above the upper border of the larger ascending channel is required to confirm the resumption of the uptrend.

On the weekly chart, we can see that the price correction seen from December 2019 till January 2020 was checkmated at the 38.2% Fibonacci price level, and the weekly candles that have followed since then have been bullish. The second weekly candle of February 2020 violated the upper border of the descending channel and touched the upper border of the ascending channel. It was, however, rejected at that level and sent back inside the smaller channel. The weekly candle is expected to mount a challenge to the upper border of the descending channel.

CRSP Weekly Chart: February 15, 2020

The daily chart reveals that CRSP had a 3-day losing streak, which was responsible for the rejection of price at the larger channel’s upper border on the weekly chart. The upside of Feb. 10 and Feb. 11 completed the inverse head and shoulders pattern with a penetrating close above the neckline. The upside gap of Thursday, Feb. 13 which took CRSP to the upper border of the larger channel coincided with the release of the 4th quarter earnings result. However, this gap was closed by the selloff that followed, which was part of the general selloff across global markets (including the Nasdaq) on coronavirus fears.

The measured move from the inverse head and shoulders pattern is therefore complete and price has made its way downwards, finding support at the neckline price of $55.84.

CRSP Daily Chart: February 15, 2020

Outlook for CRSP

For sellers, the price to overcome is $55.86. A definitive close below this price breaks below the neckline and opens the door towards $53.88 (14 Nov. 2019 and 24 Jan. lows) and $52.23 (27 Jan. and 7/8 Feb. lows). This must be confirmed by two successive candle penetrations which close below $55.86 on the daily chart. The march towards the lower border of the descending channel would have commenced with this move, and only the $49.79 (38.2% Fibonacci retracement) can pose a barrier to the smaller channel’s lower border if price breaks below $52.23. Below this area, the next support zone lies at $46.80 (previous lows of July 23, 2018 and Nov. 4, 2019), and this is also the price level that could interact with the smaller channel’s lower border. Renewed decline which breaches this border to the downside will bring the 50% Fibonacci retracement level at $42.48 into focus, where the larger channel’s lower border will then be challenged. If these moves play out, then the long-term pullback would continue.

On the flip side, a bounce off the $55.86 neckline may allow the price to retest the smaller channel’s upper border. A successful upside break of this border brings price in direct contact with the 23.6% Fibonacci retracement level at $58.84. A successful break of this level then targets the upper border of the larger channel. If price advances beyond the channel, $65.44 (formed by previous highs of May 14, July 9 and July 16, all in 2018) becomes the next available target. More importantly, this sets the tone for a continuation of the long-term uptrend, following completion of the pullback move.

Sentiment

  • Long-term: bullish
  • Medium-term: neutral
  • Short-term: neutral

The long-term trend (uptrend) remains intact. Price action in the medium term could be restricted by the two channels, giving a neutral outlook.

This is also the same outlook for the short term, where the neckline of the completed inverse head and shoulders pattern continues to prevent any downside moves. Even if the price dips lower, it may continue to trade within the smaller channel, which preserves the neutral outlook. The 23.6% Fibonacci retracement may also serve to cap price advance in the short term.

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Disclosure: I am/we are long CRSP. 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.

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